Nov 08 2007
Bernanke: Slower Growth
Fed Chairman Ben Bernanke told congress to expect slower economic growth in the coming months, that the effects of the housing market meltdown hadn’t hit bottom and that the Fed would continue to watch for inflation. From the NYT’s story: Mr. Bernanke suggested that the two rate cuts in September and October should be enough to prevent a recession, though he quickly added that the central bank will be watching for new signs of trouble.
Bernanke said the economy had demonstrated a great deal of resilience over the past several months but that spikes in oil price were brewing inflationary pressures.
The overall message to congress: stay cool, things will get a little worse though, stay cool and things should be fine.
Of course nobody in congress wants to hear this. Legislators, the arbitrators of fiscal policy, want to do something–anything–to get things going. Just listen to what Senator Schumer said right before Bernanke came in front of the legislators, as reported by the WSJ:
“I’m very concerned that there may be a bigger storm on the horizon. Quite frankly, I think we are at a moment of economic crisis stemming from four key areas: falling housing prices, lack of confidence in creditworthiness, the weak dollar and high oil prices. Each of these problems alone would be enough of a threat to our economic well-being. But taken together, they are essentially the four horsemen of economic crisis.”
That’s a dude that’s jonesing for something to do. More here:
“I’m very concerned, Mr. Chairman, that none of the regulators, including the Federal Reserve, are acting quickly or boldy enough to deal with the risks we’re facing. A laissez faire hands off attitude might be appropriate if we had any one of these crises alone. But, confronting all of these problems at once should be a call to action because the danger we face is so much greater.”
So the match is on. Bernanke is called on to something (anything!) to turn the economy around. Congress is like a kid with a cold, begging the doctor to give him some pills when the best thing to do is just be cool.
[Thanks to Crossing Wallstreet for the picture.]
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