by William Neikirk
Federal Reserve Chairman Ben Bernanke told Congress today the economy could “contract” for part of the year, indicating that it could possibly go into a recession.
He made it sound as if any downturn would not be a big deal and would not last long. Tax cuts and lower interest will help bolster the economy, he said.
The only problem is that Bernanke still lacks credibility when it comes to forecasting. This was a man who said for much of 2007 that the housing correction was “contained” and would not cause major spillover effects into the rest of the economy.
And now the question must be: Is Ben downplaying the negative forces that are hitting the economy?
You can find plenty of economists in the U.S. who believe we are in for a long, hard recession. They do not necessarily have a better crystal ball than the Fed, but they do have a little more freedom to speak their minds.
It is hard for a Fed chairman in these days to become overly gloomy about the economy. That’s because the chairman’s words are a market force in themselves, and could contribute to a crisis of confidence already widespread in financial markets.
Being totally candid—that is expressing one’s real belief about the economy’s future—is not in the DNA of the Fed. It constantly hedges its bets as it tries to make sense of the economic statistics.
And there is yet another issue: During most of 2007 and even some in 2008, the central bank did not appear to be on top of the housing crisis and the spreading credit crunch.
When it finally became clear that there could be a financial meltdown that could lead to a deep recession, the Fed acted with dispatch, even helping engineer the bailout of a major Wall Street banking firm.
It certainly has more credibility than it did a year ago.
Recent economic statistics have provided a small amount of hope that any downturn will be mild, but Friday’s report on the employment market for March will be highly important in determining where we are going.
Trust the numbers more than the words.
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Comments
I'll take the other side of that. He was late at seeing the peaks in housing and credit, late at cutting rates, clung to inflation fears too long. Now he sees the risk of recession in the 1st half?
Posted by: Braaak | April 2, 2008 4:21 PM
"RESPA VIOLATIONS SPEAK"
Forget the GUIDELINES from that guy who used to run that company, who now runs this Federal Agency.
Forget the Guy who rewrote the guidelines for that guy who use to run that Corporation who now runs this Federal Agency.
Forgive the Guy who rewrote the Investment Guidelines for that guy who used to run This Federal Agency, whom now runs that Investment Corporation.
Forgive the Guy who rewrote that "NOTE" who used to run that company who now runs "MERS" company.
Forget the American People, they didn't spend 30 billion they spent 29 billion but didn't get a rebate on the 1 billion that they didn't spend when they thought they spent 30 billion while sleeping!
IT'S IN THE DATA!
IT'S IN THE PACHMAN REPORT.
IT'S IN THE PACHMAN TELECOMMUNICATIONS REPORTS.
IT'S IN THE "TRUSTEE" DATA.
SO WATCH THE DATA AMERICA BECAUSE IF GEORGE BUSH DOESN'T GET HIS "IMMUNITY" THEN IT WILL DEFINITELY BE IN THE "DEPRESSION"
DATA!
Posted by: Roger Morris | April 2, 2008 7:26 PM
Well, lets see, the taxpayer has purchased Bear/Stearns. The Senate and House want to help the home builders and the mortgage lenders. They have opened the fed's window to banks to borrow money for lending, but they invest it where they can make money, instead of creating mortgages, cause they borrowed it so cheaply from the Fed. Greedy home buyers not qualified to buy a home got one with nothing down and pay interest only. That tells me we need more regulator's. The conservatives don't want regulators, the crooks and thieves don't want regulator's and anyone with greed and ambition does not want a regulator looking over his shoulder as it would limit his greed. That is why , in a capitalistic society, you need regulators. To check in the greed, to give the honest buyer a fair shake and to look over the crooks and conservatives shoulders at all times. Isn't it the conservatives who always cry, no regulators. whiteagle38
Posted by: whiteagle38 | April 2, 2008 9:32 PM
I thought William "Recessions are my Viagra" Neikirk retired???
Posted by: John D | April 2, 2008 11:50 PM
It boggles the mind to think that we can't even agree on the state of our financial crisis.
Is there anyone in our government Democrat or Republican that knows how to really fix this mess?
Posted by: ann | April 3, 2008 3:14 AM