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Ear to the Ground

Bernanke Baffled by Troubling Economic Trends

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Posted on Jun 22, 2011
Bernanke
AP / Susan Walsh

Fed chief Ben Bernanke, shown here in 2009, gave an explicit warning Wednesday that the economy will face serious challenges next year.

This is not really the kind of headline we want to read about the Federal Reserve right now, but top banana Ben Bernanke acknowledged at a news conference Wednesday that the Fed was “caught off guard by recent signs of deterioration in the economy.” Just the way we like our Fed chiefs: startled and perplexed.  —KA

AP via ABC News:

“We don’t have a precise read on why this slower pace of growth is persisting,” Bernanke said. He said the weak housing market and problems in the banking system might be “more persistent than we thought.”

It was the Fed chief’s most explicit warning yet that the economy will face serious challenges next year. For several months, he had said the factors working against economic growth appeared to be “transitory.”

The Fed cut its forecast for economic growth this year to a range of 2.7 percent to 2.9 percent from an April forecast of 3.1 percent to 3.3 percent. It also cut its forecast for next year to a range of 3.3 percent to 3.7 percent from an earlier 3.5 percent to 4.2 percent. The Fed also said unemployment would stay higher than it had expected earlier.

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By Lew Ciefer, June 23, 2011 at 12:37 pm Link to this comment

Bernake isn’t baffled. He’s clueless as well as crim…

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By Mark, June 23, 2011 at 6:54 am Link to this comment
(Unregistered commenter)

Is he lying, or just plain stupid?

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By diman, June 23, 2011 at 6:50 am Link to this comment

Osama Bin Bernanke!!!!! (Gerald Celente)

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By Oliver Finney, June 23, 2011 at 6:17 am Link to this comment
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I prefer Mr. Bernanke’s candid admission of some uncertainty to the inscrutably smug and incorrect omniscience of Mr. Greenspan.

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By MKS, June 23, 2011 at 6:09 am Link to this comment
(Unregistered commenter)

Suppose you have two teams playing football reasonably hard, but due to the biased calls from the ref, one team is way ahead.  At half-time, the losing team and the fans complain.  The ref says, “No problem, at the end of the game, I’ll deduct 36 points from the winners, and give them to the losers.”  The losing team and the fans are happy.

Only now, the losing team doesn’t play very hard - they’ve got 36 points coming to them.  The winning team doesn’t play very hard - the ref secretly promised to make sure they are at least 42 points ahead at the end of the game and still win.

The better answer at half-time would have been to replace the ref with one who called things fairly.  It would have been a tougher step, but would give the losing team a real chance, and give the fans a better game.

The crooked ref is “social justice”.  The fair ref is “equal justice”.

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By William Colbert, June 22, 2011 at 11:32 pm Link to this comment
(Unregistered commenter)

A recent article in the American Economic Review found that the key factor in reversing the 1929-1932 economic decline was the actions taken by the president AND Congress that convinced business and the public that government was determined to have a recovery, a determination glaringly missing from the White House and Congress today. Before any actions in 1933 had any significant ECONOMIC impacts, the PSYCHOLOGICAL impact started a definite measurable recovery. The key actions that were taken made it crystal clear that three impediments were out the window. First, the gold standard, which prevented reflation. Second and third, the ideas of limited government and budget balance, which would have limited fiscal actions. Congress sent a further message by passing the Thomas Amendment, which effectively neutralized the Federal Reserve. The gold standard is the only one of those barriers that is not fatally present today, and the stagnation continues. Roosevelt’s actions to raise farm prices, and business confidence started a reflation, which sent REAL interest rates well into negative territory, an extremely important contributor to the recovery, conspicuously missing today. Conservative reaction to the actions, similar to what we see today, led to a weakening of Presidential and Congressional actions, and a recession in about 1936.

Another recent AER paper by Stanford economist R E Hall states that realistically, there is little possibility that any of the very obvious and very necessary curative actions will be forthcoming today. A significant part if that pessimism reflects the Republicans obvious heavy bet on the old political maxim that “there is good fishing in troubled waters.”

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By SteveL, June 22, 2011 at 10:03 pm Link to this comment

This guy is baffled from the minute he gets out of bed, perhaps sooner.

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By konst, June 22, 2011 at 4:34 pm Link to this comment

This is not surprising if you understand the Austrian school of economics http://mises.org

Watch out cause next the Bernank and his group of banksters are going to use scapegoats to misdirect their ineptitude and corruption of the Fed. let’s hope it will turn out peaceful unlike the hate filled history.

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