Ben Bernanke sees a very different economy than I do, at least based on his testimony today before Congress’ Joint Economic Committee. He notes how the economy has continued to grow “moderately,” labor conditions and housing have improved and the banks are in much better health. He’s the chairman of the Federal Reserve, so he ought to know what he’s talking about.
The trouble is that much of his “positive” indicators are seen in the rearview mirror of the end of 2011 — and this is the same man who, when confronted with the housing bubble, said it wouldn’t have a serious effect on the wider economy. Now, he says, “Economic growth appears poised to continue at a moderate pace over coming quarters, supported in part by accommodative monetary policy.”
He’s not totally clueless: “Concerns about sovereign debt and the health of banks in a number of euro-area countries continue to create strains in global financial markets. The crisis in Europe has affected the U.S. economy by acting as a drag on our exports, weighing on business and consumer confidence, and pressuring U.S. financial markets and institutions.” He also noted how continuing government cutbacks are a serious impediment to recovery.
Still, the bottom line: The central bank is going to do nothing more for now except watch and wait. No QE 3.
Watch closely, Chairman Ben. The deceleration over the past quarter has been stark, punctuated by May’s dismal jobs report. The European crisis is only going to get worse, barring a major change in policy from Berlin. Bernanke is a bit too glib about the potential contagion for the playerz running America’s too-big-to-exist banks (See Whale, London). With fiscal policy paralyzed there may be only so much that monetary policy can accomplish. But if Bernanke wanted to take today’s opportunity to awaken lawmakers to the dangers facing us, he didn’t take it.
And Don’t Miss: Why Germany must give up power to save the euro || Spiegel
Today’s Econ Haiku:
Stay cool, Amazon
Ending those warehouse sweatshops
A reason to smile