Fed Chair Bernanke: Smart Consumers Are Good For The Whole Economy

Too often when people talk about being a good consumer or being educated about financial matters, the big picture is ignored in favor of images of individual wealth and well-being. But Federal Reserve Chairman Ben “It rhymes with stanky” Bernanke says that it’s really in everyone’s best interest for us to be smart about what we do with our money.

“Financial education supports not only individual well-being, but also the economic health of our nation,” explained Benny B. (I can call him that because we both get confused for Paul Giamatti) earlier today at a town hall chat with teachers held deep in the bowels of the Federal Reserve batcave in D.C. “As the recent financial crisis illustrates, consumers who can make informed decisions about financial products and services not only serve their own best interests, but, collectively, they also help promote broader economic stability.”

Families who put some thought into their savings and financial planning are better prepared for emergencies and the down times that can rend relationships for those who are not prepared.

And Bernanke pointed out that it doesn’t require immersion in macroeconomics to get people on the right path, citing a Fed study that found people who had taken a high school financial education course were more likely to save regularly.

“Effective financial education… involves teaching them the essential skills and concepts they will need to make major financial choices,” he explained. “High school students might not recall specific information from a lesson about loans a year later when they go to get their first car loan or student loan. However, if they understand and remember some basic ideas–for instance, that it’s important to shop around for a loan to get the lowest interest rate, to review the fees charged, and to know how to contact financial counselors and advisers–they will be more likely to make a good decision.”

With regard to the hot-button topic of student loan debt, Bernanke echoed the sentiment we discussed last week of going through financial puberty early, so that young consumers understand the ramifications of taking on debt before they ever take out that first loan.

“Students with some exposure to economic thinking will be more likely to conceptualize their spending on post-secondary education as an investment in their own human capital and choose their school, course of study, means of paying for their education, and profession with that thought in mind,” said Bernanke. “Likewise, the economic tool of cost-benefit analysis should help students make sounder personal and financial decisions.”

And, added the Chair, becoming a good consumer tends to spill over into other aspects of one’s life that aren’t always directly tied to finances: “Making good financial decisions requires that consumers seek out relevant information from trustworthy sources, and that they use critical thinking, quantitative reasoning, and decision-making skills. These competencies are also some of the fundamental abilities our schools seek to inculcate in our children.”

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  1. Loias supports harsher punishments against corporations says:

    NOTE: Smart consumers keep a healthy savings in their possessions, an act which stifles the economy when what it needs if more spending. Ben Bernanke therefore like consumers that are destroying the economy.

  2. dush says:

    Also, smart bankers who don’t print a ton of money to bail out their cronies are good for the whole economy.

  3. dicobalt says:

    Smart consumers put companies like BestBuy out of business.

  4. pythonspam says:

    Why is a finance not a required class for high school education? Even if it is just balancing a checkbook, learning about compound interest, and even throw in an incentive beyond grades (I’m sure a local credit union would donate a few $50 CD’s each year to show a captive audience the benefit of a budget and a savings account.
    Oh yeah, they are too busy trying to teach to the tests to meet the requirements for NCLB.

    • lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

      Oh I wish it was! Some of the people I work with could have used a class like this. And they should also teach parents not to helicopter around their 35 year old “kids” like they’re still in grade school, worrying about every little thing, and paying their cell phone bills. Ugh.

    • ARP3 says:

      It was required when I was in high school, but I think they did away with this to teach to NCLB.

      Oh, and we don’t want the government indoctrinating our kids with their big government socialism, right? Teching practical skills is close to teaching morals and that’s socialism. Socialism is bad.

    • Willow16 says:

      New Jersey requires a personal finance course in high school.

  5. lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

    “stanky” Bernanke

    Sounds like a polka band leader. :)

  6. T. Bone says:

    Federal Reserve Chairman Ben Bernanke has been dead wrong about the economy over and over again. But the mainstream media and many Americans still seem to have a lot of faith in the Federal Reserve. It doesn’t seem to matter that Bernanke and other Fed officials have been telling the American people lies for years. As I always say, most people believe what they want to believe, and many people seem to want to have blind faith in the Federal Reserve even when logic and reason would dictate otherwise. The truth is that things are not going to be getting much better than they are right now. When the next wave of the financial crisis hits, the U.S. economy is going to fall back into recession, financial markets are going to crash and unemployment is going to absolutely skyrocket. But you will never hear any of that from the Federal Reserve.

    • T. Bone says:

      The following are statements that Bernanke actually made to the public….

      #1 (July, 2005) “We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”

      #2 (October 20, 2005) “House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.”

      #3 (November 15, 2005) “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.”

      #4 (February 15, 2006) “Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.”

      #5 (February 15, 2007) “Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low.”

      #6 (March 28, 2007) “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”

      #7 (May 17, 2007) “All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.”

      #8 (January 10, 2008) “The Federal Reserve is not currently forecasting a recession.”

      #9 (June 10, 2008) “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

      Ben Bernanke and the other folks running the Federal Reserve are just going to keep insisting that everything is going to be okay for as long as they possibly can. They are going to tell you that they know exactly how to fix things and that the economy will be back on track very soon.

      Don’t be stupid and believe them this time.

      • Proselytic says:

        THANK YOU! Saved me the work! :)

        (Although I have not verified all these, but they all appear to read right.)

  7. SilverBlade2k says:

    Here I thought stupid consumers kept the economy going (buying shit they don’t need, buying too much shit, buying homes they can’t afford, living on credit cards, overspending on credit cards, paying interest on credit cards when they can’t afford to pay it off), and it was the smart consumers that stifle the economy because they don’t do any of that….

  8. Mark702 says:

    Ben Bernanke is not good for the economy. He should be executed for treason against the US.

  9. ninjustin says:

    Doesn’t matter how smart of a consumer you are when greedy bankers and a system built on bonuses crash the economy.

  10. ARP3 says:

    Actually, hatred of Ben B is one thing liberals and conservatives can agree on. His role for the last X years has been to make sure the banks continued to make lots of money, despite economic conditions, to the detriment of all others if needed.

  11. Proselytic says:

    Mr. Bernanke the American economy and capitalism hath died. At _least_ three times now and probably a fourth soon, which in part Mr. Bernanke must take some culpability. Corrupt maybe, but smart he’s not…