Chairman of the Federal Reserve, Ben Bernanke, in a speech to the Economic Club of Washington, said that it is too early to declare a lasting recovery:
The Fed chief’s speech to the Economic Club of Washington made clear he thinks the economy will struggle even as it recovers from the recession. He said the economy confronts “formidable headwinds” — including a weak job market, cautious consumers and tight credit.
Those forces “seem likely to keep the pace of expansion moderate,” he said.
The central bank has leeway to keep rates low because inflation is under control and is expected to stay tame because of the economy’s weakness. Some private forecasters even fear that the recovery could fizzle late next year as government stimulus fades.
Asked about prospects for such a “double dip” recession, Bernanke said he could not guarantee it won’t happen. He stuck with his forecast for a moderate recovery but said a “vigorous snapback” is less likely.
If history is any guide, when Mr. Bernanke gives positive news, the exact opposite will occur, as was outlined in detail in Flashback: Bernanke on Unemployment: â€˜we donâ€™t think it will get to 10 percentâ€™. When Mr. Bernanke gives negative news, you can be assured that it will be much worse than it is made out to be.
Based on Mr. Bernanke’s comments at the ECW the American public can surmise the following:
- The economy will not moderately expand, but contract even more than it has thus far.
- Inflation is not under control, regardless of what the official CPI numbers say, thus by keeping rates prematurely low the central bank will continue to devalue the dollar’s purchasing power.
- A ‘vigorous snapback’ is not at all likely. Don’t even expect a moderate snapback.
On March 15, 2009, Mr. Bernanke predicted that the recession will probably end in 2009 if the financial markets can be stabilized and banks start lending again. It is now the end of 2009, and Mr. Bernanke has suggested that it is too early to declare a lasting recovery and even says that avoiding a double-dip recession cannot be guaranteed.
Astute observers, then, must conclude that the banking and financial systems have not yet been stabilized and bank lending has not been re-started as previously predicted.