Thursday, November 20, 2008

Bernanke confirms severity of economic recession

I've been saying for over a year now that the economic difficulties America is having are getting deeper and that there is no current indicator that the bottom is anywhere near. I'll say it again. America is in recession now, it will last all of 2009, and there is no telling how much longer.

Now Fed Chairman Ben Bernanke is saying much the same thing. The occasion for his remarks was the report that the 542,000 new claims filed for unemployment insurance last week was the highest number since the summer of 1992. As would be expected from either the Fed Chief or the Treasury Secretary, Ben Bernanke's statement is hedged in positive terms so that nothing he warns of is likely to cause the stock market to drop. The financial powers always have to speak in financial happy talk, even when giving bad news for fear they will make the financial market reactions to a bad economy worse then they already are. Since the Dow Jones Index has already dropped 50% from its high, those involved in the market sure don't want it to get worse if they can help it.

The Fed is expected to lower the key rate from 1% by a quarter percent in order to try to combat deflation. Of course, once they get to zero, there is nothing further the Fed can do to prevent deflation. After that they would have to pay people to take their money.

The fiscal stimulus that the Republican Congress members are now blocking are the only possible way of slowing the economic difficulties.

No comments: