Bernanke: Growth Will Be Frustratingly Slow
It appears Ben Bernanke is both Master of the Universe and Master of the Obvious, all at the same time.
In a press conference Wednesday afternoon, Federal Reserve Chairman Ben Bernanke announced that he is unhappy with the rate of growth — or lack thereof — in the American economy.
“The pace of progress is likely to be frustratingly slow,” Bernanke said. He believes that concern over Europe's growing inability to manage its debt problems is also contributing to “strains” in financial markets. This is because, as we have seen with the bankruptcy and probable collapse of MF Global, our bankers (in this case, Jon Corzine) bet big bucks that European countries wouldn't default on their debts.
I guess this was one of those things George Washington was hinting at when he warned against us entangling our interests with Europe. Well, that and WWI, WWII, Korea, Vietnam, the Cold War, Bosnia, Iraq, Iraq II, Afghanistan, etc.
In any case, Bernanke expects the market and the economy will improve over the next two years, but at a slower pace than had previously been predicted. For example, the Fed had originally predicted unemployment next year would be 7.8 percent. They are now expecting unemployment to be 8.5 to 8.7 percent.
Well gee...they were only off by ten percent. Of course, that assumes we ever get down to 8.5 percent. Right now, we're sitting at 9.1 percent. It would take a minor miracle to get it down to 8.5 percent. Factor in the impending wave of bank troubles tsunami-ing over from Europe, and you're looking at a "no chance in hell" scenario.
If things keep going the way they are headed in Europe, we may see double digit unemployment into next year. That would certainly put a damper on ol' Ben's mustachioed smirk.
In addition to European problems, the Fed blamed the markdown on a weak housing market and unemployment. In other words, Bernanke has picked up a newspaper or two since he last spoke. I suppose that's an improvement. With growth rates hovering around (and below) two percent, the American economy simply isn't mustering enough oomph (yes, that is the technical term) to boost employment. Companies are pocketing the profits, but don't have a rationale for hiring more workers.
The Fed is counting on growth hitting a whopping 2.5 percent by next year, which would be an improvement...but still too low to boost employment to acceptable levels. This means the barely growing economy is still chugging along fast enough to avoid government or Fed intervention, but not fast enough to benefit American workers and families.
Whether the economy will sink and get a government-intervention boost, or rise on its own, remains to be seen. For now, that's all Bernanke has to offer. Consider this meeting the equivalent of a football punt, with the hope that the defense holds and we get the ball back in better field position.
In the meantime, hang on tight. It could get ugly.
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