by: Greg Robb

The following statement by Fed Chairman Bernanke is scary if you think about it. Does he think a complete economic collapse is near? Is one inevitable? Why else does he say the Fed will be vigilant? Got gold or silver?

THE FED Bernanke tells market the Fed is on the ball By Greg Robb, MarketWatch Last Update: 10:07 AM ET Aug 31, 2007 JACKSON HOLE, WY (MarketWatch) — Federal Reserve Board Chairman Ben Bernanke on Friday told global financial markets what they wanted to hear: that the Federal Reserve is on the ball and prepared to act as needed to prevent the turmoil in financial markets from gathering enough strength to hurt the U.S. economy.

Bernanke, speaking at a closely-watched annual Fed conference, said the central bank will be paying “particularly close attention to the timeliest indicators” to assess how the recent credit crisis and financial market turmoil is impacting the real economy. Bernanke said the economy continued to expand into the summer despite the weakness in housing but “in light of recent financial developments, economic data bearing on past months or quarters may be less useful than usual for our forecasts of economic activity and inflation.” In his remarks, Bernanke repeated the Federal Open Market Committee pledge to act as needed to limit the adverse effects on the broader economy that may arise from the disruptions in financial markets.

The Fed chairman said the tightening of credit standards, if sustained, “would increase the risk that the current weakness in housing could be deeper or more prolonged than previously expected, with possible adverse effects on consumer spending and the economy more generally.” “Inevitably, the uncertainty surrounding the outlook will be greater than normal, presenting a challenge to policymakers to manage the risks to their growth and price stability objectives,” Bernanke said. He said it is not the responsibility of the Fed to protect lenders and investors from the consequences of their financial decisions, but quickly added that “developments in financial markets can have broad economic effects felt by many outside the markets and the Fed must take those effects into account when determining policy.

“Well-functioning financial markets are essential for a prosperous economy,” Bernanke said. Bernanke said the central bank stands ready to take additional steps to provide liquidity and promote the orderly functioning or markets. One positive note was that past efforts to strengthen capital positions and the financial infrastructure “place the global financial system in a relatively strong position to work through this process,” Bernanke said.

Greg Robb is a senior reporter for MarketWatch in Washington.