ben s bernanke : remarks speech by mr ben s bernanke, chairman of the board of governors of the us federal reserve system, at the presidenta€™s working group market stability initiative announcement, washington dc, 14 october 2008. * * * good morning. before i begin, i want to express my appreciation of my colleagues, secretary paulson and chairman bair, for their efforts in what has been an extraordinary collaboration. as americans well know, the challenges evident in the financial markets and in the economy are large and complex, but i believe that the steps taken today will help us to overcome them. our strategy will continue to evolve and be refined as we adapt to new developments and the inevitable setbacks. but we will not stand down until we have achieved our goals of repairing and reforming our financial system and thereby restoring prosperity to our economy. over the past year, the federal reserve has actively used all its powers and authorities to try to help our economy through this difficult time. and central banks around the world have consulted closely and cooperated in unprecedented ways to reduce strains in financial markets and to bolster our economies. we will continue to do so. however, clearly the time had come for a more comprehensive and broad - based solution. history teaches us that government engagement in times of severe financial crisis often arrives very late, usually at a point at which most financial institutions are insolvent or nearly so. waiting too long to act has usually led to much greater direct costs of the intervention itself and, more importantly, magnified the painful effects of financial turmoil on households and businesses. that is not the situation we face today. fortunately, the congress and the administration have acted at a time when the great majority of financial institutions, though stressed by highly volatile and difficult market conditions, remain capable of fulfilling their critical function of providing new credit for our economy. the congress's prompt and decisive action in passing the financial rescue legislation made possible the critical steps that have been announced this morning. i also find it heartening that we are seeing not just a national, but a global response to the crisis, commensurate with its global nature. indeed, this past weekend, the finance ministers and central bankers of the group of seven industrialized countries announced a set of principles embodying a comprehensive approach to dealing with the crisis. the steps we are taking today are fully consistent with those principles. as in all past crises, at the root of the problem is a loss of confidence

than what they were when i took the position, as a result of foreign currency purchases that we have been making since 2008. the average growth rate between 2005 and 2012 was 4. 3 percent, and average per capita growth during those years was 2. 5 percent. the average inflation rate then as today is within the target range, such that we can say that we did not, and do not today, have an inflation problem. the last decade started with a deep recession and negative growth, and in the middle of the decade, we moved to rapid growth of 6 percent for a number of years, an exceptionally high rate for countries at the level of development of israel. following the financial crisis, we continued to grow at a higher rate than other developed countries, and if we continue maintaining responsible policy, we can, i hope, continue this way. the unemployment rate is very low compared internationally, since while unemployment in israel is in decline, it has risen in many countries. long – term inflation expectations are close to the midpoint of the target range. this means that the public believes that the economy can continue growing without inflationary outbursts, and it can plan its economic life without concern of spikes in prices. this is a very important achievement — thirty years ago, we never would have believed we would attain it. the government deficit grew in 2012 by 4. 2 percent, and in order to reinstate control over the budget, the government recently decided on important measures to reduce the deficit in the coming years. these measures are also very important due to the fact that the interest burden that the government is paying is very high in international comparison, as a result of the risk premium that the financial markets include for the israeli economy. a diplomatic bis central bankers ’ speeches process, if the markets attribute any importance to it, would reduce these costs in the final analysis, although it would take time, since the interest paid today is on debt that was issued in the past, and a reduction in the interest rate would affect new debt. there are many challenges facing the israeli economy. the first challenge to which will relate is handling the problem of poverty. the data unsurprisingly show that the incidence of poverty is higher among large families, and lower as the percentage of wage earners increases. furthermore, the incidence of poverty among arabs and ultra - orthodox jews is very high. in this context, it is important to implement a policy that will increase the labor force participation rate of these two sectors,