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Bernanke: We Won’t Bounce Back in 2009

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Posted on Feb 24, 2009
Bernanke
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While he was able to give the banking business a little lift on Tuesday, Federal Reserve Chairman Ben Bernanke also delivered the sobering news that the economy as a whole isn’t likely to make big gains in terms of recovery before 2010 or later.

The New York Times:

Mr. Bernanke told the Senate Banking Committee that the Federal Reserve was doing everything it could to unlock credit markets and ease the financial crisis. But a full recovery, he said, is months, if not years away.

“If actions taken by the administration, the Congress, and the Federal Reserve are successful in restoring some measure of financial stability — and only if that is the case, in my view — there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery,” Mr. Bernanke said.

Major what-ifs included the ramifications of an increasingly global financial crisis, as well as a negative feedback loop as lower confidence translates to worsening market conditions, and vice versa.

Investors seemed to interpret some of Mr. Bernanke’s remarks as hopeful. In particular, stock prices picked up when Mr. Bernanke played down fears that the government would “nationalize” American financial institutions.

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By Margaret Currey, February 25, 2009 at 9:43 am Link to this comment
(Unregistered commenter)

How long can a country stay around when they do not make anything, how long will be buy imports that do not last very long. 

This country was heading for a disaster long before Obama became president, even before the Bush took office.

When the credit companies became the new GOD and was really putting the screws to their customers that is when I noticed that things are going wrong and would get worse,  That is when I got rid of all my credit cards.  Even when the melt down was occurring Bank of America was allways on the telephone asking me to take out a credit card.  And the credit cards allways after you to take out insurance in case you lost your job.

Well now how are people going to stay in their houses even with help from the banks if they lose their jobs.  And that is going to happen to more people as the disaster unfolds.

Just stay tuned to the market and watch it melt down.

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By Shift, February 25, 2009 at 3:54 am Link to this comment

Bounce back?  Splat is a better word.

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By cruxpuppy, February 24, 2009 at 9:42 pm Link to this comment

You’d expect the chief central banker to argue that the financial system must be “stabilized”, that is, rescued, in order to save the economy, but why is there no argument to the contrary? Why is there no voice in Congress to challenge this perverse notion that banking powers the economic engine when common sense knows that it is labor that drives production and demand, not finance?

So completely has the financial sector taken control of our economic life that the means to facilitate the exchange of goods (money) is regarded as even more important than the production of those goods.

The exploitation of producers and consumers by the financial sector has led us into this killing deflation, and this is generally known, but rather than speak the truth, that consumers are exhausted by debt and something must be done to bail them out, our leaders speak most urgently of stabilizing the financial system and only as a kind of after thought pass an inadequate stimulus bill.

A fundamental shift in priorities is required to get the economy going again. Finance has to take a back seat to labor & production, but this is not happening. Nothing has changed. Financiers are in control of reforming the financial sector. No nationalization! The privileges and prerogatives of finance are sacrosanct.

Obama’s populist rhetoric is just that, rhetoric. He will not take on finance and attempt to return the economy to common sense priorities. And the Republicans resist government spending, insisting on tax cuts, clearly ignoring the fact that it is not taxation and regulation that inhibits production as much as it is the predatory and dominant role of finance that bleeds labor and business with exorbitant interest rates.

One hopes that there is economic recovery, of course, but that is a short term hope. Maybe we’ll move out of this bust into another boom, but that is very doubtful. The productive economy is burdened with a financial sector it cannot sustain and another boom will more than likely not occur.

On the other hand, if there is no recovery and things get much worse, this may provoke a system reset and an economic realignment. The derivatives market could be eliminated, the influence of finance curtailed. That would be a prescription for a sustainable economy without these destructive and unnecessary boom/bust cycles.

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