Federal Reserve Chairman: Economy slowing, outlook worse for 2012.

[woo me with science]

http://www.washingtonpost.com/business/economy/fed-says-economy-is-slowing-will-let-bond-program-expire/2011/06/22/AGPzYzfH_story.html

Federal Reserve, acknowledging slowdown, reins in forecasts for economic growth
By Neil Irwin
6/22/11

The economic recovery is slowing and the outlook for next year has gotten worse, Federal Reserve Chairman Ben S. Bernanke said Wednesday, backing away from the view that the slowdown of the past few months was merely temporary.

The central bank released new economic projections that showed weaker growth in both 2011 and 2012 than had been forecast just two months ago. Despite the slowdown, the Fed said it will end a program of buying vast sums of Treasury bonds at the end of June as scheduled and gave no sign it is contemplating new action.

But Bernanke, whom markets turn to as a purveyor of economic wisdom, said the Fed had no solid answers as to why, two years into an economic recovery, growth keeps disappointing.

“We don’t have a precise read on why this slower pace of growth is persisting,” Bernanke said in a news conference Wednesday afternoon. He suggested that problems in the financial sector and the housing market, and with consumers trying to pay down their debt, had been underestimated. “Some of these head winds may be stronger or more persistent than we thought.”

....(more at link)

[blueclown]

1. Can you say double dip recession?

[RBInMaine]

19. No projections of double dip recession. The sky isn't falling so chill. No need to doom and gloom.

[Doctor Hurt]

29. You can hope for it

but that won't make it happen.

[blueclown]

31. Who's hoping for it?

I don't have a good-paying job. I don't even have a full-time job. I just graduated from college. You think I'm happy?

[Armstead]

2. Waiting for rich corporations to actually hire Americans might be one reason...

[vroomvroom]

3. Obama's Solution: More Spending/Tax Cuts -- Republicans speak, Obama listens. Why?!?

Mr. President thank you for saying that your continued belief in the wisdom of deep social spending cuts and tax cuts that benefit the few will stimulate job growth and although these are republican gifts i am glad you like using the excuse that at least you arent doing them as deep as what a republican president would do. So in other words you are saying at least you arent as bad as a republican because when i vote for president i am not looking for a preident that looks for real change and listens to his base but one that goes against what i want and looks to me and say at least i dont suck as bad. That is very special to me and holds a place in my heart.

No Republicans are demanding you focus your attention on cutting medicare and gutting spending as a way to create Jobs and get this economy rolling. And you are listening to them agian.

And its no secret that you have accepted the republican plan to raise the reitrement age to 69, and also given republicans $2.5 trillion in spending cuts so far, with no clear sight on when republicans will stop holding hostage the debt ceiling, despite republcans openly admitting that the ceilign will be raised no matter what which was echoed by your staff months ago. So i thank you for playing this good cop/bad cop routine with republicans so that you both can get what you want: More tax cuts for the top few, and for the rest of us to pay for it.

So, to further boost jobs and the economy i recommend you listen to republicans once more and offer more tax cuts, not just for the wealthy, but also payroll tax cuts, and tax holidays across the board. That will surely put everyone back to work. Also republcains demand that you kill several government agencies and so maybe you should continue to close and layoff thousands of government employees. The republicans say this will create jobs and so it must be true because why else would you listen to them.

Thank you Mr. President. God Bless you!

[TomClash]

4. "Outlook for next year has gotten worse"

Setting up Obama to take the fall.

[Autumn]

6. If Obama takes the fall it's because he fell

for the fantasy of bipartisan bullshit.

[Name removed]

7. Deleted message

Sub-thread removed by moderator. Click here to review the message board rules.

[woo me with science]

17. As long as he keeps pushing supply side fixes,

his promises for economic turnaround are going to be as effective as the ones in the 2008 campaign turned out to be.

[Ter]

25. So the Fed supports Republicans?

They are neutral, they support anyone who does their bidding and boys to them. They love Bush and Obama, and any recent president. They despised Kennedy, and have no love for Ron Paul or Dennis Kucinich. They don't give a rat's ass about abortion, gay rights, or climate control. They just want absolute power, and they have it.

[slackmaster]

5. The Fix is in

:argh:

[Ter]

26. See comment 25

The Fed doesn't fix elections, if you don't bow to them they don't wait until election day, they make you bow.

[Cali_Democrat]

8. Obama's biggest mistakes on the economy

1) Attempted bipartisanship
2) Reappointing Ben Bernanke


Helicopter Ben has actually hurt the economy with his two rounds of quantitative easing. All we got is higher commodity prices and shitty job growth. Also, most of the jobs created were crappy jobs with low pay. These kinds of jobs aren't going to lead to sustainable long term growth.

Ben is the same guy who said subprime was contained in 2008. :rofl:

The US economy is seriously fucked. The only choice may be to flee the country at this point and head to Canada or some Nordic country where they actually know how to run an economy.

[banned from Kos]

9. Then you vehemently disagree with Krugman - who says

we need FAR MORE Quantitative Easing. Krugman threw out the $4 trillion number for QE.

I agree with Krugman/Bernanke since QE is stimulative AND lowers the deficit.

[Cali_Democrat]

10. Indeed I do disagree with Krugman when it comes to QE

I have stated this time and time again on these boards.

BTW, how exactly does QE lower the deficit? The only way I can see that is the higher prices for bonds and the lower yields as the Fed buys treasuries. Lower yields will lead to lower financing costs as the US rolls over its debt. But that is small and insignificant. In fact, when QE2 first started, bond prices actually fell and yields went up which goes to show you that the Bond market is too large for the Fed to manipulate. The bond market runs the show when it comes to yields and interest rates in the overall economy.

QE sure was stimulative....it stimulated the hell out of commodity prices and caused inflation to spike.

Mission accomplished? :shrug:

[banned from Kos]

11. The more QE the more the Fed earns and

turns over to the Treasury.

http://latimesblogs.latimes.com/money_co/2011/01/federal-reserve-2010-record-profit-financial-crisis-intervention.html

$78 billion is pretty sporty.

And there is no QE affect on commodities - its a myth. Remember crude hit $147 in June 2008 BEFORE QE began.

[Cali_Democrat]

12. Three things....

1) That profit isn't only because of quantitative easing. It was the result of many different kinds of asset purchases, not just US government-issued fixed income securities.

2) The Fed still has to sell the assets in the future. That is the point at which you should measure profit and loss. Markets fluctuate.

3) QE2 started in late 2010 and will end very soon. The period of January 2011 to June 2011 is not included in this.

[banned from Kos]

13. Ok - fair enough - but lets says they do sell those

assets at a loss - they don't nick the Treasury for it.

The "loss" is absorbed in the money supply, and very readily I hasten to add.

And on (3) - QE2 had the timeline you note - but was smaller than QE1. Yet neither cause commodities to rise above 2008 levels.

(x - gold, silver, cotton, and coffee) But the most important commodities - oil, natgas, wheat, corn, rice, soybeans all well below 2008 highs.


and I have like 10 posts here - don't know about your past predictions but I like your grasp of pricing - at least you don't make some ridiculous claim about the Fed "giving" money to banks for free.

[Cali_Democrat]

14. Welcome to DU!

:toast:

[girl gone mad]

21. Why would you compare pre-crash commodities prices to post-crash commodities prices?

There was a speculation in the pre-crash debt frenzy, and speculation again after the Fed's quantitative easing pumped liquidity back into the system.

QE2 absolutely caused speculative flows into commodities, as Richard Koo very clearly laid out in May.

There's probably no better person to assess the state of this economy than Richard Koo, the Nomura economist whose book The Holy Grail Of Macroeconomics is all about the unique nature of a post-crisis, deleveraging, balance sheet recession.

The first key points from his new report are encapsulated in this chart, which confirms that QE2 has had no positive impact on the money supply. There's simply no connection. The world is NOT awash in cash.



So in light of that, what has QE2 done?

When the Fed buys a specific asset (in this case, longer-term Treasury securities), the price of that asset rises. That prompts private investors to re-direct their funds to other assets, which leads to a corresponding increase in the price of those assets.

And thus the impact on other markets:

The only remaining destinations for these funds were equities, commodities, and real estate. Real estate had just been through a bubble and remained characterized by heavy uncertainty. In commercial real estate, for example, banks—at the request of US authorities—are engaging in a policy of “pretend and extend” and offering loans to borrowers whose debt they would never roll over under ordinary circumstances. That means that current prices do not accurately reflect true market prices. Housing prices, meanwhile, resumed falling late in 2010.

UK house prices have been falling since mid-2010, and the Halifax House Price Index dropped 1.4% in April 2011 alone (the decline was 3.7% on a y-y basis).

The only remaining options for private-sector investors have been stocks and commodities. That, in my opinion, is why both markets have surged since the announcement of QE2.

His conclusion: QE2 was a huge gamble, and the end of these bubbles could exacerbate the great recession.

Read more: http://www.businessinsider.com/richard-koo-on-qe2-2011-5#ixzz1Q9YUjTCm

You should be comparing pre-QE2 to post QE2, not pre-crisis to post crisis.

[RBInMaine]

18. If it is "seriously fucked" I would seriously like your own point by point for how to fix it. No kid

ding. I would like to know what you think needs to be done in some detail.

[Cali_Democrat]

24. Here's 5 things we need to do ASAP

1) Roll back the Bush tax cuts for everybody and then raise taxes on the wealthy even more. Get taxes near Eisenhower levels for the rich.
2) Create public works programs similar to what was done during the great depression.
3) Pour hundreds of billions of dollars into education and job training for high paying jobs in the 21st century.
4) Get a new Federal Reserve board that believes in savings and investment rather than low interest rates, bubble creation and debt-driven consumption.
5) Dramatically slash the military budget and use those resources to invest in green jobs.

Here's why we're fucked

1) There is no political will to raise taxes, especially on the wealthy. Both parties are firmly controlled by the wealthy.
2) The Republicans and even some Dems will be against public works programs and will continue to talk about spending cuts and deficit reduction.
3) Same thing. The politicians in Washington will never spend hundreds of billions of additional dollars on education and training. They don't give a shit that America is falling behind the rest of the world in education. The greater possibility is that they will cut education.
4) The politicians in Washington will never appoint a Federal Reserve chairman that will believe in savings and investment. We will continue to get more Alan Greenspan's and Ben Bernanke's.
5) The Military Industrial Complex is too powerful and will never allow the defense budget to be slashed in any meaningful way. The Republicans will say that green jobs equals communism and will never go along with it.


That's why we're seriously fucked. Got it now? Fleeing or revolution may be the only viable options.

It's sad.

[woo me with science]

15. 33 replies to this thread. Only 14 have not been deleted. nt

[DemocratSinceBirth]

16. America Is Broken

~

[RBInMaine]

20. Exactly, in detail, how would YOU fix it?

[DemocratSinceBirth]

30. I Don't Have A Clue

~

[Hippie Puncher]

22. so Bernanke never actually said what's in the headline?

instead we get someone's biased re-interpreted opinion

[girl gone mad]

23. How is it a misinterpretation?

[Hippie Puncher]

28. because it doesn't actually quote what he said. it reinterprets.

[Citizen Worker]

27. Pssst, Ben, it's JOBS. That's what the country needs and the only "fix" that will work.

[krabigirl]

32. It will never "bounce back." we are in a slow, lengthy decline. It is what it is,