What is going on with the economy?

[2Real4me!]

Bernanke Doesn't See Return of '70s Woes
Thursday February 28, 12:59 pm ET
By Jeannine Aversa, AP Economics Writer



Bernanke Dismisses Worries About US Economy Returning to '70s-Style 'Stagflation'

WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke told Congress Thursday that the nation isn't "anywhere near" the dangerous stagflation situation of the 1970s.
With the economy slowing and inflation rising, fears have grown that the country could be headed for the dreaded twin evils of stagnant growth and rising prices known as "stagflation."

"I don't anticipate stagflation," Bernanke told the Senate Banking Committee. "I don't think we're anywhere near the situation that prevailed in the 1970s."

"I do expect inflation to come down," he added. "If it doesn't, we will have to react to it."
High energy prices and rising inflation do complicate the Fed's job of trying to keep the economy growing and inflation contained, Bernanke acknowledged.
Energy prices are creating "inflationary stress," Bernanke said. And, that is "complicating" the Fed's work in terms of shoring up the economy, he said. Oil prices galloped past $100 a barrel on Thursday. Gas prices, meanwhile, rose closer to records above $3 a gallon.
President Bush, at a news conference Thursday, noted the slow economic growth but said the nation isn't headed into a recession.
He rejected calls for additional stimulus efforts, instead advising patience. "Why don't we let stimulus package one, which seemed like a good idea at the time, have a chance to kick in?" Bush said at the White House.
Bernanke's testimony in the Senate caps back-to-back appearances on Capitol Hill that started in the House on Wednesday. The Fed chief's overarching economic message was the same on both days: The Fed stands ready to lower a key interest rate yet again to bolster the struggling economy.
Many fear the country is hurtling toward a recession or is in one already.
The central bank started lowering a key interest rate in September. Over just eight days in January, the Fed shaved 1.25 percentage points, the biggest one-month reduction in a quarter century. Economists and Wall Street investors predict the Fed will cut rates again at its next meeting, March 18.
Just before Bernanke testified, the government reported that the economy nearly stalled in the final quarter of last year. It grew at a pace of just 0.6 percent, a big loss of momentum compared with the prior quarter's brisk 4.9 percent growth rate.
The committee's chairman, Sen. Christopher Dodd, D-Conn., described the nation's economic situation as "very serious, if not perilous."
Dodd said: "Growth is slowing. Inflation is rising. Consumer confidence is plummeting, while indebtedness is deepening."
Bernanke indicated he is prepared to lower rates even as high oil prices heighten inflation risks.
To energize the economy the Fed cuts rates. To combat inflation, it would boost rates. Rising inflation can reduce the Fed's maneuvering room in terms of revving up a slowing economy.
"We are concerned," Bernanke said. "We are trying to balance a number of different risks against each other," he told lawmakers.
Still, Bernanke is hopeful that energy prices -- and overall inflation -- will moderate somewhat this year.
And, he expresses hope that the economy will turn stronger in the second half of this year, helped by the Fed's rate reductions and the recently enacted rescue package of rebates for people and tax breaks for businesses.
"I realize that my testimony wasn't the most cheerful thing you'll hear today ... but I do very much believe that the U.S. economy will return to a strong growth path with price stability," Bernanke said.
Sen. Richard Shelby, R-Ala., however, worried that rising inflation could make it harder for the Fed to steady the wobbly economy.
Shelby wondered "how much more room the Federal Reserve will have to provide further monetary accommodation without threatening long-term price stability, which is very important to all of us."
He added: "While it's difficult to see our nation's economy experience minimal growth, the consequences of failing to restrain inflation will be far more painful and more difficult to unwind."
Bernanke, however, said the Fed's No. 1 battle right now is to shore up the economy. "At the moment, the greater risks are to the downside," Bernanke said, referring to shaky economic growth and turmoil in financial markets.

[2Real4me!]

It's funny how Ben Bernanke is trying not to get everyone in a frizzy with todays crazy economy. We all know its not good and who knows when the economy will be better. Just watch the slowing or more like the frozen housing market. It said, that the housing market is going to get worse even through 2009. They said, it will keep going down.Oil two weeks ago was $88 dollars a barrow and today it's $100 a barrow.

It seems even the economist experts don't even know where its heading but if you're the consumer you can just see it doesn't look good right now. People are upside down on their mortgages and their's talk that feds are going to lower the rate again. Property values are dropping fast too. Oh stocks have neverbeen so low which is a good time to buy stocks. If you watch the stocks they keep dropping more then staying stable or at least increase. It seems the economy is not doing so good because theirs nothing but bad news about it for now.

[RedOctober]

As an economist...I can go into a long detailed response....but I'll just go into a long summation.....later.

[Pavel]

RedOctober Wrote:As an economist...I can go into a long detailed response....but I'll just go into a long summation.....later.

If you are a real economist, as you purport, what is your short summation?

[RedOctober]

Pavel Wrote:

RedOctober Wrote:As an economist...I can go into a long detailed response....but I'll just go into a long summation.....later.

If you are a real economist, as you purport, what is your short summation?

We're in the trough.

[fourvetta]

RedOctober Wrote:We're in the trough.

No where to go but up?

[RedOctober]

fourvetta Wrote:

RedOctober Wrote:We're in the trough.

No where to go but up?

Everything I have read thus far suggests we should bottom out in 2008. And yeah..things should eventually go up. Barring some other major failure.

The value of the dollar is very low...people oversea's will be buying and contracting with US companies....keeping people employed, but there will be some layoffs no doubt for the year as certain industries will contract...causing other industries that support them to contract as well.

Housing industry, should slowly recover primarily because banks need to make money. And right now everyone is saving or paying down much of thier upside down mortgage as they can. That puts a lot of money back into them...and they can't pay interest unless they lend that money out.

Cost of energy should spur investment into soloar, wind, nuclear, etc. Ethanol is STILL not cost efficient even at $100 a barrel. The technology needs to be developed even further.

....wife says its dinner time...gotta run.

[RedOctober]

Continuing....

Also...if you take note, not a single presidential canidate is implying a tax increase....oh how so clever. I would expect a new tax though....some of us may already be paying (I think I am). That will be a new deduction from your paycheck in the form of health care. Many corporations and business already pay half the cost of health insurance for thier employees with the employee paying the other half....I think we will see this formula applied to all now. So if your already paying it...it won't be a big deal. Where its going to shock is where people currently don't pay for health care coverage (low wage earners). I would expect they won't be happy as they were for all intents and purposes getting it free (government picks up the tab for people who have the inability to pay).

Private health insurance will probably start dropping soon after. And large companies will start offering it as a "benefit" again as its done in Canada....speaking of Canada...

With the two currencies on par with each other...I wouldn't be surprised to see some sort of attempt at an economic union in the future in order to combat the EU.

As for how "bad" the reccession hits you....it will vary by state, then by metro area, then by town. Thus some places may just experience a "slow-down" while others will see a lot of boarded up buildings.

No doubt they will start pulling troops back from Iraq....that will have an effect as well, as suddenly you have people looking for jobs. The severity this will play is determined how fast this is scaled back...and how many they transfer over to Afghanistan. If there smart....they'll time it to the retirment of baby boomers...and of course with the dollar so weak, many of them will be spending thier retirement funds here in the US.

[Pavel]

You are speaking some doom & gloom, butthe weak dollar makes the US very attractive not only to investors, but also to tourists. I think that tourism will have a big boost in the economy and gas prices will go up this summer in order to pull in as much foreign money as we can, but come Fall, gas prices will fall down to $2.50 again. However, in order to protect our economy, though, interest rates will need to go up.

[RedOctober]

Pavel Wrote:You are speaking some doom & gloom, butthe weak dollar makes the US very attractive not only to investors, but also to tourists. I think that tourism will have a big boost in the economy and gas prices will go up this summer in order to pull in as much foreign money as we can, but come Fall, gas prices will fall down to $2.50 again. However, in order to protect our economy, though, interest rates will need to go up.

*huh*

I don't see where I was implying doom and gloom....