I Call BS on Bernanke!
Summary: In today’s edition of the Wall Street Journal, chairman of the Federal Reserve, Ben Bernanke announced that he predicted a slow recovery in the market by the third quarter of 2009. He reasoned that the housing market was showing signs of stabilizing, and that fiscal and monetary stimulus (i.e. increases in taxes for WPA in the TARP/Stimulus Package and FED buying $300M in Treasury Bonds to increase liquidity, respectively) should support demand. He also referenced the boost in the stock market as a sign of recovery, insinuating that we’ll be hitting rock bottom soon and be on our way to recovery by the end of the fiscal year.source: “WSJ: Bernanke Foresees Slow Recovery”
Analysis:
This is BS, and Here’s Why
First of all the housing market is far from stabilizing. Approximately thirty percent of foreclosed houses are still being held off the market, because experts fear, and rightly so, that it would cause further disparities in the economy. Second, two-thirds of the “sales” that Bernanke is reporting, as a sign of the housing market stabilizing, is from foreclosed homes! This means that the market is hardly where it was before late 2007, because foreclosed houses sell at “fire value”, a small fraction of the market price.
The fiscal and monetary infusions that the FED and Geithner have implemented will not increase demand! In order to have an increase in demand people would have to have jobs, and that quite simply that is not the case. Unemployment is at a twenty year high at 8.5%, while analysts at Yale and Harvard predict an increase to, at least, 10% by the end of the year. In addition, Barack Obama’s new credit card “bill of rights” has made getting a loan nearly impossible for people without premium credit scores, a significant majority of the American population. The president’s tax increase for individuals making over $250M have added to a reduction in overall supply from small businesses afraid to overproduce in fear of a lack of consumption or demand for their commodities. This is a downward spiral, as you can see, and our nation is facing record lows in supply, demand, and economic output.
Now ask yourself: if the economy isn’t showing signs of recovery why would the president, treasury secretary, and chairman of the FED tell you it is? It’s simple, even the FED is afraid of over inflation, especially after our high rate of deflation and unemployment. The government can’t spend anymore money, essentially, with our national deficit at a worrisome $11.2 Trillion. The federal government and FED is literally out of resources for any more monetary and fiscal infusions. Thus, it needs to build confidence in the stock market so that small investors will start buying. However, small investors and spectators beware, because Wall Street will probably sell big, in order to increase national liquidity, just as your start buying, leaving you broke. If you need proof then look at the price of gold at $910 now, a good indication that most big investors don’t trust current market moves or the future of our currency. Experts are already starting to call this Depression II and I don’t think they’re far-off.
“If actions taken by the administration, the Congress, and the Federal Reserve are successful in restoring some measure of financial stability - and only if that is the case, in my view - there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery.”
- Ben Bernanke
Unemployment will keep rising and the U.S. economic growth will keep falling. Residential sales and construction will remain weak. House prices will continue to fall as fast as foreclosures continue to rise. Not to mention, securitization markets, which help create more lending opportunities, are still obstructed.
Open your eyes. We have yet to see a glimpse of hope.
