Bernanke: Economic Recovery "is close to faltering"

[BrianFromWA]

Hm.

I fully admit that I know little about macroeconomics or high finance, but I do know a little bit about running programs and mission accomplishment. This article brings up some questions for me.

Federal Reserve Chairman Ben Bernanke says the economic recovery "is close to faltering" and the central bank is prepared to take further steps to support it.

The economy is growing more slowly than the Federal Reserve had expected, Bernanke said Tuesday before the congressional Joint Economic Committee. He said the biggest factor depressing consumer confidence is poor job growth.

"We need to make sure that the recovery continues and doesn't drop back and that the unemployment rate continues to fall downward," Bernanke said.
...
Bernanke offered his grim assessment after the economy barely grew in the first half of the year and it created no net jobs in August. Consumer confidence fell this summer to the lowest point since the recession. Europe's debt crisis has also intensified.

After their September meeting, Fed policymakers warned of significant downside risks to the economic outlook. As a result, the Fed voted to shift $400 billion of the Fed's investment portfolio from short- to longer-term Treasurys to try to drive down long-term rates.

In August, the Fed said it planned to keep short-term rates at record lows until at least mid-2013, assuming the economy remained weak.

Both decisions drew three dissenting votes on the Fed's policy committee. The three dissents, all from regional Fed bank presidents, were the most dissents in nearly 20 years.
...
On Tuesday, Bernanke wasn't shy in offering Congress more advice: He reiterated his warning that lawmakers should not cut spending sharply while the economy is weak.

In a speech in Cleveland last week, Bernanke called long-term unemployment a "national crisis" and said Congress should take further steps to address it. Bernanke noted that about 45 percent of the unemployed have been out of work for at least six months - a level previously unseen in the six decades since World War II.

In that speech, Bernanke said there was only so much the Fed's interest rate policies could achieve. He said that long-term unemployment, budget deficits and the depressed housing market were three priority areas that Congress should address.

First, is the Fed Chairman presidentially-appointed and congressionally-approved?
Secondly, didn't he say in July 2009 that:

Bernanke said in his opening comments to the House Financial Services Committee that the bank's focus is to foster economic recovery and will be able to prevent inflation despite a pledge to keep a key bank lending rate at a near zero rates.

Bernanke said that the outlook for the U.S. economy is brighter and that the Fed will remove its massive monetary stimulus from the economy as soon as it can..."We will calibrate the timing and pace of any future tightening, together with the mix of tools to best foster our dual objectives of maximum employment and price stability..."

So in 2009, his bank was able to "foster economic recovery" and "prevent inflation" in order to get "maximum employment," but in 2011 there's "only so much he can do" and congress needs to fix "long-term unemployment, budget deficits and the depressed housing market" before his policies can work? While at the same time saying "the central bank is prepared to take steps to support (the economic recovery)?"
Thirdly, how many times does this guy have to be wrong in order to stop doing things [taking steps, using bank tools, etc.]?
From 2006:

November 2006

BERNANKE: This scenario envisions that consumer spending, supported by rising incomes and the recent decline in energy prices, will continue to grow near its trend rate and that the drag on the economy from the [inaudible] housing sector will gradually diminish. The motor vehicles sector may already be showing signs of strengthening. After having cut production significantly in recent months, in response to the rise in inventory of unsold vehicles, automakers appear to have boosted the assembly rate a bit in November, and they have scheduled further increases for December. The effects of the housing correction on real economic activity are likely to persist into next year, as I've already noted. But the rate of decline in home construction should slow as the inventory of unsold new homes is gradually worked down.

or 2007:

February 2007

BERNANKE: We expect moderate growth going forward. We believe that if the housing sector begins to stabilize, and if some of the inventory corrections still going on in manufacturing begin to be completed, that there's a reasonable possibility that we'll see some strengthening in the economy sometime during the middle of the new year.

Our assessment is that there's not much indication at this point that subprime mortgage issues have spread into the broader mortgage market, which still seems to be healthy. And the lending side of that still seems to be healthy....

Overall, the U.S. economy seems likely to expand at a moderate pace over the second half of 2007, with growth then strengthening a bit in 2008 to a rate close to the economy's underlying trend.

tl;dr fodder

 

[EL PRESIDENTE]

duh. all just justification for QE3. what a scumbag.

 

[Haakzilla]

..."The" Bernake vs.

 

[MARIS61]

Are we the next Japan?

http://money.cnn.com/2011/09/27/news/international/US_Japan_recession.moneymag/index.htm

 

[Denny Crane]

Are we the next Japan?

http://money.cnn.com/2011/09/27/news/international/US_Japan_recession.moneymag/index.htm

The guy is right and the guy is wrong.

He's right that it's a debt driven recovery, but he's wrong about needing massive govt. spending. Our GDP isn't as high as it looks because $1.5T of it is govt. borrowed money. No matter what we do, the recovery won't happen until consumers pay down enough of their debt to feel secure in borrowing again or simply spending some of what they've been using to pay down their debt.

Tax cuts are exactly the prescription because it does help the consumer pay down his debts faster. Government borrowing is not encouraging anyone to lend elsewhere; it's the prescription for the new normal (lost decade).

The caveat I'll make is that if govt. had transferred consumers' debt to its books, we might be enjoying a nice recovery about now. Instead, the money went to the banks so they could buy other banks and own a lot of foreclosed properties.

 

[huevonkiller]

The guy is right and the guy is wrong.

He's right that it's a debt driven recovery, but he's wrong about needing massive govt. spending. Our GDP isn't as high as it looks because $1.5T of it is govt. borrowed money. No matter what we do, the recovery won't happen until consumers pay down enough of their debt to feel secure in borrowing again or simply spending some of what they've been using to pay down their debt.

Tax cuts are exactly the prescription because it does help the consumer pay down his debts faster. Government borrowing is not encouraging anyone to lend elsewhere; it's the prescription for the new normal (lost decade).

The caveat I'll make is that if govt. had transferred consumers' debt to its books, we might be enjoying a nice recovery about now. Instead, the money went to the banks so they could buy other banks and own a lot of foreclosed properties.

The Lost Decade is a great comparison.

 

[Denny Crane]

The Lost Decade is a great comparison.

Current govt. strategies seem to be turning this into a Lost Generation.

 

[huevonkiller]

Crane Shore for life.