Bernanke says US economy on cusp of recovery

Discussion in 'Wall St. News' started by S2007S, Aug 21, 2009.

  1. S2007S



    Im laughing because I think this time he is right on, its certainly on the "CUSP" of recovery. Im just wondering when he is going to start raising rates and stop printing money. If the recovery is around the corner rates cannot stay down at 0%.

    Bernanke says US economy on cusp of recovery

    By JEANNINE AVERSA, AP Economics

    JACKSON, Wyo. – Federal Reserve Chairman Ben Bernanke declared Friday that the U.S. economy is on the verge of a long-awaited recovery after enduring a brutal recession and the worst financial crisis since the Great Depression.

    Economic activity in both the U.S. and around the world appears to be "leveling out," and "the prospects for a return to growth in the near term appear good," Bernanke said in a speech at an annual Fed conference in Jackson Hole, Wyo.

    The upbeat assessment was consistent with the Fed's observations earlier this month. The central bank has taken small steps toward pulling back some emergency programs to revive the economy.

    Still, Bernanke stressed Friday that despite much progress in stabilizing financial markets and trying to bust through credit clogs, consumers and businesses are still having trouble getting loans. The situation is not back to normal, he said.

    Restoring the free flow of credit is a critical component to a lasting recovery.

    "Although we have avoided the worst, difficult challenges still lie ahead," Bernanke told the gathering. "We must work together to build on the gains already made to secure a sustained economic recovery."

    Strains in financial markets worldwide persist. Financial institutions face "significant additional losses" on soured investments and many businesses and households are experiencing "considerable difficulty" in getting loans, he said.

    The Fed chief's remarks come two years after the financial crisis broke out and nearly one year after it had deepened to the point of sending the nation into a near meltdown.

    The bulk of Bernanke's speech was a chronicle of the extraordinary events of the past year. Financial markets took a turn for the worst starting last September and into October, nearly shutting down the flow of credit. The crisis felled storied Wall Street firms and forced the government to take over mortgage giants Fannie Mae and Freddie Mac, as well as insurance titan American International Group Inc.

    Despite efforts to save it, Lehman Brothers failed. It filed for bankruptcy on Sept. 15, the largest in corporate history, which roiled markets worldwide.

    To prop up shaky banks, the government created a $700 billion bailout fund, a program that proved wildly unpopular with an American public suffering fallout from the recession.

    The Fed swooped in with unprecedented emergency lending programs to fight the crisis. It eventually slashed a key bank lending rate to a record low near zero. And Congress enacted programs to stimulate the economy, the most recent coming in February with President Barack Obama's $787 billion package of tax cuts and increased government spending.

    "Without these speedy and forceful actions, last October's panic would likely have continued to intensify, more major firms would have failed and the entire global financial system would have been at serious risk," Bernanke said.

    In recounting actions by the Fed and the government to battle the crisis, Bernanke didn't acknowledge any missteps by the central bank and other regulators. Critics have argued that the Wall Street bailouts in particular sent a message that companies that take reckless gambles will be rescued by the government. There's also the concern that the rescues put taxpayer's dollars at risk.

    The public and lawmakers on Capitol Hill were incensed by the repeated taxpayer bailouts of AIG, totaling more than $180 billion, and outraged after the company paid hefty bonuses to employees who worked in the very division that brought down the firm. The $700 billion taxpayer-funded bailout program used to prop up banks, AIG, General Motors, Chrysler and other companies also drew criticism from the public and politicians.

    But unlike in the 1930s, Washington policymakers this time acted aggressively and quickly to contain the crisis, said Bernanke, a scholar of the Great Depression.

    "As severe as the economic impact has been, however, the outcome could have been decidedly worse," he said.

    Global cooperation in battling the crisis was crucial, with central banks slashing interest rates and the U.S. and other governments delivering fiscal stimulus, he noted.

    "The crisis in turn sparked a deep global recession, from which we are only now beginning to emerge," the Fed chief observed.

    Sponsored by the Federal Reserve Bank of Kansas City, the conference draws a virtual who's who of the financial world — Bernanke's counterparts in other countries, academics and economists. This year's forum focused on lessons learned from the crisis and how they can be applied to prevent a repeat of the debacles.

    To that end, Bernanke again called a rewrite of the U.S. financial rule book — something Congress is currently involved in. He again pressed for stricter oversight of companies — like AIG — whose failure would endanger the entire financial system and the broader economy. Obama would tap the Fed for that job, something many lawmakers in Congress don't like.

    Bernanke also said the U.S. needs a process to wind down big, globally interconnected companies, much like the Federal Deposit Insurance Corp. does for failing banks.

    "Looking forward, we must urgently address structural weaknesses in the financial system, in particular in the regulatory framework, to ensure that the enormous costs of the past two years will not be borne again," he said.
  2. Yet again - why would he raise rates, jeopardizing the recovery, when there are no signs of inflation? Didn't you see the last CPI report?
  3. dtan1e


    for a minute i was expecting the poster as BuyloSellhigh
  4. They're going to call it "growth" as soon as the GDP has an uptick.

    Much as in the same way as housing starts.... dropped from 2.2MM annual rate to 570K annual rate. Then when starts tick up to 575K rate, Voila! That's growth!
  5. S2007S


    Exactly right, such a substantial drop yet a small uptick in starts creates a buying frenzy on wallstreet.
  6. S2007S


    Why? I guess everyone wants him to start raising rates back to .50% when were experiencing a minimum of 3% GDP growth, by then it will be too late, they did this back in 2001-2002 when they took rates to historical lows, that's why we had the credit crisis we had. Low rates created easy money and unbelievable amounts of liquidity that created the bubble in housing, stocks, private equity buyouts and commodities. It seems the only way to produce any growth in this economy is to create asset bubbles, all the millions of jobs created over the last 10-20 years will never be brought back, you can keep wishing that jobs will be plentiful over the next 5-10 years but they wont, I highly doubt we get back to 4-5% unemployment anytime over the next decade.

    If they are so positive about growth in the 3rd and 4th qu of 2009 they should at least raise them .25-.50 maybe get them back up to 1% by the 1st qu of 2010. I guess they are just lying to themselves and know for a fact they see absolutely no economic recovery anytime soon.
  7. Give Bennie a break.

    He just doing his job.

    He ain't talking big talk.

    He is supposed to offer ROSY SCENARIO.

    Now Barry that be a different story.

    He be making promises and changing verbs from "creating" jobs to "preserving" jobs, although he be silent with the job stuff lately.

    I am not sure Barry anymore of a liar than any other politician that populates either of these two corrupt major parties, but he be as full of promises he can't keep as he is as full of himself, and I have never seen anyone on the American political stage as full of himself as this character.
  8. The economy is nowhere near stable enough to raise rates. The Fed will NOT wait until 3% GDP growth to raise rates...they will raise before that. Right now, with no official positive GDP growth, and no inflation (if anything, deflation is more prevalent), it makes absolutely zero sense for the Fed to raise rates.

    Also, where have you heard that the Fed is positive about growth in the 3rd and 4th quarters of 2009? I have never heard such a thing, but I could be wrong. If I am, please provide a link...
  9. Right. Known as a "pathological narcissist"...

    Other famous ones... Hitler, Stalin, Jim Jones, Caligula...
  10. S2007S


    #10     Aug 21, 2009