Fed chief: Recession or 'serious situation,' same basic idea

Federal Reserve Chairman Ben S. Bernanke didn’t call it a recession today, but he might as well have.

In his semiannual congressional testimony on the economy, the Fed chief delivered a sober assessment that left no doubt about the central bank’s priorities.

Remember his tone in June, hinting that the Fed might soon raise interest rates to battle inflation pressures? Forget that -- despite another scary inflation report today.

Bernanke’s speech "strongly suggests that Fed officials do not have their fingers on the tightening trigger," Goldman Sachs economists said in a note.

The Fed chief said policymakers felt that "considerable uncertainty surrounded their outlook for economic growth and viewed the risks to their forecasts as skewed to the downside."

Asked whether he thought the country was officially in recession, he said: "People are very worried, so I certainly would never make the claim that even if we were not in a technical recession, that it wasn’t a serious situation."

The stock market took this hard at first, with the Dow Jones industrial average diving 227 points early on. But the market has since rebounded, helped by a drop in oil prices that also appears to be driven by Bernanke’s recession-like tone.

Near-term crude futures in New York were down $6.71 to $138.47 a barrel at about 11 a.m. PDT. The Dow was basically flat at 11,060.

But Bernanke’s comments brutalized the dollar. The euro spiked to a record high of $1.604 today from $1.592 on Monday.

Photo: Ben Bernanke before the Senate Banking Committee today. Joshua Roberts/Bloomberg News

Comments

[USAF Vet Dan]

Bernanke isn't telling the whole truth. The inflation has been caused by the Fed flooding the economy with dollars needed to cover the checks that Congress has been writing but cannot cover (Iraq, social programs to illegal immigrants, etc.).

Congressman Ron Paul is telling it like it is - and far tougher economic times are inevitable. We simply cannot continue to allow Congress to sell out to the highest bidder (lobbyist, special interest group, etc.) nor can we continue to fund our global empire (troops in 130 foreign countries which costs us $1 TRILLION / year). Neither McCain nor Obama will do anything but increase the size of our federal government and its out-of-control spending.

Its time for the insanity to stop, lest we as a nation and we as a people end up bankrupt. We must reduce the federal government back to the size and scope as defined in the Constitution. We must also replace the Federal Reserve fiat currency with a sound monetary system (backed by precious metals).

Don't we owe that much to our children who are going to inherit this mountain of debt our government is creating?

Go to www.CampaignForLiberty.com to join the tens of thousands who, like you, are fed up with this mess. We CAN fix this, but only if we stop accepting the status quo, get off our butts and DO something... before its too late!

Dan Druck
Congressional Candidate
Illinois 14th CD

[Michael S Harris]

Why can nobody just spit it out, just tell the truth and then plan for it.
North America is economically up against the wall.
Depression ... no!
Severe reality check .... yes!
In the end it will be told that language of self deception was at the root of
problems.
America is in debt to a communist country.
America is overweight and diabetic.
Americans are deeply in debt.
America is in debt.
America is in a tribulation with nature.
Americans elected a murdering sacrificing felon as President.
Americans have let him dismantle aspects of the Constitution.
America keeps her citizens intellectually dim.
The Euro is closing in twice the value of the almighty buck.
America is at war with Iran.
Russia is watching America closely and preparing for war.
Americans with dual citizenship are steering America towards a reef.
America is narcistic.
American Empire will last 40 months longer.
America is heavily influenced by Zionists.
America trusts in a God that will seek retribution.
America went shopping when it declared war.
Shock and Awe ... America has seen nothing.
America's spirit is locked away in Guantanamo.
Nobody really wants American dollars anymore.
America impeaches presidents for making love but not for killing a million.
America uses the slavery of 12 million Mexicans to feed itself and tidy up.
America uses the slavery of millions of Chinese to make its baubles.
America has turned journalism into future career for morons.
In America Tatoos = New Literacy.
20% of active American Servicemen use antidepressants.
Dick Cheney is the president of America.

God bless America

[bt]

I'll be laughing my ass off if Ron Paul supporters get to say "I told you so." before the election even takes place.

[mike]

The American economy has been off the wagon for at least a year. Only a 4-class student can't see it. I thought Bernanke got more education, but he aint. You help Fannie - you loose the budget. The reason of the bubble of the US credit system is that it has become too relaxed under Clinton and Bush. Please keep the Saviours like Bush and McCain away from us. The most stupidest of all thing i heard was the Bush's decision on drilling the shelf.

[Robert NO longer in LA]

We made a huge mistake NOT choosing Ron Paul; he has UNcommon, Common Sense...as for Bernie - the dollar will become the cheapest toilet paper in circulation. Can't 'tighten' as that will KILL all the financials of Wall Street and the US States. So get ready for HYPER inflation, so people will HAVE to spend, because EVERYTHING will be EVEN MORE EXPENSIVE tomorrow, and the day after thaty, and the following day...until people are buying houses as a hedge against inflation, and the BANKS are made whole, and whatever we haven't bought, foreigners will have bought, just like Budweiser. This is the penalty for not getting rid of the moronic, corrupt, inept fools in Congress, and your State capitol.

[Rev. Dave]

According to this Bloomberg.com story "Bernanke Abandons June Reading on Economy, Sees Risks to Growth, Inflation."

source: http://www.bloomberg.com/apps/news?pid=20601087&refer=&sid=aCDlHroUxpSQ

Commentary:

I guess all that happy talk in June by Bernanke didn't quite work out as planned. In a separate news story, Bernanke has ordered 300 million pair of rose-colored glasses for every man, woman and child in the United States. This is just the economic cure for every mental recession we've had since the Great Depression. You folks do understand this is parody/satire at work here.

source: Phil Gramm

[eliana]

Yuck, I don't know about all that. If you noticed, Bernanke was very careful -not- to use the word "recession," but things like "the economy has continued to expand." What exactly does that mean? I was pretty entertained by this translation of BB's speech: http://www.236.com/news/2008/07/15/federal_reserve_chairman_ben_b_1_7732.php

[Steven Whiddon]

Gotta give Bernanke some credit & I'm sure he has had some sleepless
nights. At least he has done what he could to keep more banks from
failing and the masses from making a run on the banking system.
The Fed's have got themselves between a rock and a hard spot plain and
simple. Increase interest rates will cause more banks to fail & more houses
being foreclosed on. They have flooded the market with dollars and when
you do that you increase inflation. Since inflation is a hidden tax & printing
money is simple to do why not take the easy way out? Who cares about the
next generation or holding our government responsible for the actions
they take?

[Dick]

Everyone is skewing "Gentle Ben." He is just giving us more of the Greenspan Fed talk. Remember that the great guru, Alan G., gave us 1% money and did nothing while "exotic" mortgages were allowed in the market place. Although Bernanke is probably not up to the job (I really don't knolw who is), it is Greenspan and the "print money" crowd that caused this.

[Tom Shillock]

Bernanke said in testimony to the Senate Banking Committee, there are ``significant downside risks to the outlook for growth,'' and ``upside risks to the inflation outlook have intensified.'' That’s his circumlocution for the economy is in stagflation. That was obvious to poor, working class or middle class persons at least since 2003 but apparently not evident to Bernanke even 30 days ago. That may be because monetary policy is powerless in the face of stagflation so Bernanke has been in denial. It’s time for Keynesian fiscal policy that puts people to work at living wages in ways that help build or rebuild infrastructure to reduce our dependence on fossil fuel particularly oil. This includes rebuilding railroads, water and sewer systems, energy conservation programs such as massive insulation, and expanded broadband telecommunications to reduce commuting. Greenspan, aka "the maestro" demonstrated splendid monetary irresponsibility for a dozen years and Bernanke is doing a splendid job ensuring his Wall Street reference group buddies don't suffer too much. Now it's time for congress to help the bottom 97 percent of America.

[Tim]

Well, well, well.... The inevitable has finally started to become obvious. It doesn't take a Ron Paul to have seen this coming... It just took a little bit of logic. There is a thing called "logic" you know, and it is very good, if properly studied, at getting one particularly keen on thought processes such as "if a then b".... "a, therefore b". If you keep on spending more than you have, you will be in debt "to someone". I wonder, has anyone here ever asked WHO we are in debt to? Anyone ever asked HOW it is possible to "spend more than we actually have"?

I feel no pity for the rather dimwitted masses of this country, who have sold out their own children and futures, and their children's futures, all because they weren't willing to give a little thought to this, even as much thought as they give to how cool their next SUV purchase willl make them look to their white-collar colleagues who will all look VERY uncool as they jump out of windows seeing all that they've banked on "evaporating" as the economy sees through the veneer of bullshit that has been spread over it for so long. Too bad we'll have to blame Iran for all our troubles now, and send as many suffering morons over there to kill and die "for our country" as is possible while those who are really benefitting from this "not quite recession" reap the profits from our stupidity all around. Good luck...

Maybe if Congressman Paul runs as an independent....

[Mike]

Bernie saying this to us in my own words, Our financial system is in a state of quantum change. Never before in the history of the world has such strain been put upon our monetary system. Please do not panic, it will only make the situation worse. I'm not able to provide all the guidance I wish I could for you. The problem is compounding and an exponential rate. I'm at the end of my rope and there not much more that can be done. The complexity of this situation is beyond our worlds comprehension. In the next 50 years, our world will see the consequences of our past 150 years of existence. I am very scared and wish my very best to all of you. I'm sorry I can't be of more help to you.