In public, most Federal Reserve governors, including the chairman himself, insist that the economy is well on its way to recovery. Behind closed doors, however, the Fed is already debating strategies for what to do if the economy begins to slide:

Federal Reserve officials are beginning to debate quietly what steps they might take if the recovery surprisingly falters or if the inflation rate falls much more.

Fed officials, who meet next week to survey the state of the economy, believe a durable recovery is on track and their next move—though a ways off—will be to tighten credit, not ease it further. Fed Chairman Ben Bernanke has played down the risk of a double-dip recession and signaled guarded confidence in the recovery.

But fiscal woes in Europe, stock-market declines at home and stubbornly high U.S. unemployment have alerted some officials to risks that the economy could lose momentum and that inflation, already running below the Fed’s informal target of 1.5% to 2%, could fall further, raising a risk of price deflation.

source: WSJ

When, not if, the recovery falters is exposed as one big lie, only those that vehemently trust mainstream media will be surprised. The rest of you tin foil extremists will have been proven right, and your doom and gloom will no longer be just pessimism porn, but reality.

Nothing has changed since 2008. Repeat: Nothing has changed since 2008. None of the fundamental issues have been resolved in our banking system, the government has taken on trillions more in debt, unemployment is set to rise into late 2010 and 2011, retail sales are down, the housing market is going o get decimated yet again, and stock markets will likely get slammed by the end of this year.

Of course, we could just be making all this gloom up. But if that were the case, why do Fannie and Freddie need another $160 billion right now to remain solvent, with the potential bailout to rise to $1 trillion in a “worst-case” scenario? Or what about state governments going broke? If every thing was hunky dory, they would not require $50 billion to pay teachers, police and firefighters. These are just a couple of clues among the many hundred (thousand?) out there.

The economic shit is about to hit the fan again. Perhaps this time most Americans will realize that there is not going to be a quick fix and hoping for change will do diddly squat to improve our situation.

Hat tip Paul Revere