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.
For some reason I feel like having one of these at Baskin Robins right now:
A â€˜vigorous snapbackâ€™ is not only likely, butÂ almost guaranteed.
Why can’t Bernanke or anyone else in Washington address the mountain of debt under which we and our children are being subjected to?Â The subject never comes up,Â like it does not exist and has zero bearing on our economy.Â Bernanke and his predecessor, Mr. Greenspan are two of the most culpable people involved in our slide.Â Just crank-up the presses, while the bond market is ready to crash.Â Â
Jack…. that would require telling the American people the real truth — that WE THE PEOPLE are the collateral for all of this debt and it will take not years, but generations to pay it off.
The other subject that never comes up is that excessive credit because of cheap money was the cause of the problems in the first place.
@Mac – I think you have mixed up the meaning of the term snapback. Â In this context, I’m sure they mean snapback to be an immediate recovery. Â That is most definitely NOT guaranteed… quite the opposite, as you and I agree.
Patrick — I see now.. And you are absolutely correct. My bad. I have updated the post. Thanks for the cross-check on that!
To quite honest with you guys, I’m not sure why anyone even gives a damn about he says at this point.
A blindfolded monkey throwing darts has a better chance of hitting a bullseye thanÂ Bernanke has about being right about the economy.
Rick, I just busted out laughing so hard I might have woken one of the kids. I kind of use Bernanke’s comments as an inverse forecasting tool nowadays. As I pointed out in the article, if he is toting good news, the opposite of what he says will happen. I wonder if Goldman uses a similar tool — or perhaps they have a direct red phone line to Mr. B and Mr. G?
If I was standing out side and bernanke said the sun was out I would still look up to see if he was right . I don’t trust hin any farther than I can sling a brick building .
The distrust I read here for our dear Mr. Bernanke warms my heart. Thank god there are people like you out there that get it.