bank run blog

Speaking to members of Congress today, Federal Reserve Board Chairman Ben S. Bernanke delivered a message of cautious optimism about the US economy, saying that modest growth may be possible later this year. The Associated Press reports :

“Federal Reserve Chairman Ben Bernanke told Congress Tuesday the economy should start growing again later this year, his most optimistic assessment of the country’s financial health since the recession struck with force last year.”

Bernanke sees reasons for renewed hope that the economy may be on the rebound :

“’We continue to expect economic activity to bottom out, then to turn up later this year,’ he told lawmakers. ‘We expect that the recovery will only gradually gain momentum.’

Recent data suggest the recession may be loosening its grip on the country, Bernanke said.

‘The pace of contraction may be slowing,’ he said. It was similar to an observation the Fed made last week in deciding not to take any additional steps to shore up the economy.”

If the tenor of Bernanke’s economic prognosis sounds familiar, it’s only because you’re paying attention. Here’s what the Fed chairman told an audience of distinguished academics and policymakers at the International Monetary Conference in Barcelona in June, 2008 :

“We may see somewhat better economic conditions during the second half of 2008, reflecting the effects of monetary and fiscal stimulus, reduced drag from residential construction, further progress in the repair of financial and credit markets, and still solid demand from abroad. This baseline forecast is consistent with our recently released projections, which also see growth picking up further in 2009.”

Today’s guardedly upbeat remarks were made in Congressional testimony before the Joint Economic Committee. Bernanke told the same committee in March, 2007 :

“Growth in consumer spending should continue to support the economic expansion in coming quarters. In addition, fiscal policy at both the federal and the state and local levels should impart a small stimulus to economic activity this year.”

Bernanke’s forecast for 2007 concluded :

“Overall, the economy appears likely to continue to expand at a moderate pace over coming quarters. As the inventory of unsold new homes is worked off, the drag from residential investment should wane. Consumer spending appears solid, and business investment seems likely to post moderate gains.”

Keenly sensing a “cooling” of the US housing market in 2006, USA Today reported that Bernanke was expecting a “soft landing” :

“The housing market, after flying high for five years, has lost altitude but appears headed for a safe landing, Federal Reserve Chairman Ben Bernanke said Thursday.

‘It seems pretty clear now that the U.S. housing market is cooling,’ Bernanke said in a question-and-answer session following a speech he delivered on banking in Chicago.

He noted that home sales and construction are slowing.

‘Our assessment at this point … is that this looks to be a very orderly and moderate kind of cooling,’ Bernanke said.”

A former professor of economics at Princeton, with degrees from Harvard and MIT, it is certain that Bernanke is one of the best and brightest of his generation. The question is, at what?

Associated Press : Bernanke: Economy should grow again later in 2009

Federal Reserve Board : Remarks by Chairman Ben S. Bernanke at the International Monetary Conference, Barcelona, Spain (via satellite), June 3, 2008

Federal Reserve Board : Prepared Testimony of Chairman Ben S. Bernanke Before the Joint Economic Committee, U.S. Congress, March 28, 2007

USA Today : Bernanke: Housing market is headed for a soft landing (May 18, 2006)