Bernanke: Recession Is Still Over

Tim Cavanaugh | August 21, 2009

My uncharitable colleague Brian Doherty questions the absolutely inarguable fact of Federal Reserve Chairman's Ben Bernanke's awesomeness, but doesn't give Bernanke credit for his greatest talent: his Oz-like ability to maintain confidence in his genius in the face of absolutely no results.

After Bernanke announced today that the end of the recession was nigh, the stock market applauded. But the rest of the economy gave a Bronx cheer. Among other gangrene shoots:

This week brings another "surprise" increase in jobless claims. You might not be all that surprised.

The Mortgage Bankers Association says 13.2 percent of mortgages on one-to-four-unit properties are in default. The foreclosure fad continues to catch on from coast to coast and in between. How long can the craze last? Mish's Global Economic Analysis and School of Dance predicts no market bottom until 2102, substantially more pessimistic than the 2012 bottom predicted by other doomsayers.

Seventy-eight bank failures and counting have the cash-strapped FDIC ready to work for food.

Sample company performance: Caterpillar's year-to-year sales have been halved. Why is there so little demand for Caterpillar machinery? Among other things, because new housing starts are off nearly 40 percent [pdf] from 2008 levels.

There are also signs that the stimulus-engorged rally in leveraged loans is coming to an end, leaving debt-heavy companies without sources of even more debt. This is actually good news because it will help the brute-force deleveraging of the economy -- one of the few positive trends out there. But it's not going to create growth anytime during Bernanke's reappointment campaign.

Updates: It's official: The recession did not end in May or June. July, anyone? Also Mish has corrected the 2102/2012 typo I quibbled on.

Comments

Douglas Gray|8.21.09 @ 7:09PM|#

He's not a bad man, just a bad wizard!!

|8.21.09 @ 7:24PM|#

Someone teach Tim about the alt tag. Such a great picture, such a terrible waste.

Paul|8.21.09 @ 7:26PM|#

And now that the wildly successful Cash For Clunkers program is being ended (despite its wild successfulness!) I'd imagine we're going to see a drop in car sales, too.

|8.21.09 @ 7:29PM|#

Cash for clunkers was a pilot program for Fannie Mae; you'll be able to get a no-doc loan overnight, as long as you promise to burn the house down within thirty days of the closing. We'll get this economy back on track, by Cthulu!

|8.21.09 @ 7:29PM|#

Paul, that just can't be. Automakers are ramping up production to fill future orders that are gonna roll in with the economic boom coming now that the recession is officially over.

|8.21.09 @ 7:35PM|#

Mish's Global Economic Analysis and School of Dance predicts no market bottom until 2102

Now that is goddamn pessimistic.

|8.21.09 @ 8:38PM|#

You know what really sucks? Even when the recession is really over, the recovery is going to be accompanied by hyperinflation. I'm not sure what letter the resulting curve is associated with, but it will ever be an accursed one by the time this is through.

Isn't the world ending in 2012, anyway?

|8.21.09 @ 8:42PM|#

Tulpa, right after my 49th birthday. Weeeeee

|8.21.09 @ 8:45PM|#

That's assuming you don't piss off any death panel members before then.

|8.21.09 @ 9:00PM|#

Always quick to urinate in a guys cholesterol lowering breakfast cereal ain'tcha.

|8.21.09 @ 9:08PM|#

And I eat steak, egg, and cheese bagels for breakfast. So there's going to be some serious cholesterol in the goldenrod discharge at that hour.

Tim Cavanaugh|8.21.09 @ 9:12PM|#

Note to self: It's true. If you write something about the Fed, somebody will mention gold within 11 comments.

|8.21.09 @ 9:23PM|#

Tim, you're gonna pull something reaching that far:}

Sean W. Malone|8.21.09 @ 9:27PM|#

Why wouldn't they mention gold within 11 comments? Do you really think that there's some other commodity money out there that would replace the Fed that isn't gold/other precious metal?

Seems doubtful... What's wrong with gold anyway? It's shiny, heavy, a great store of value and outside of a few industrial uses and jewelry, is pretty much useless for any day-to-day consumption and there isn't all that much of it. Sounds about like what I'd want out of a currency, no?

Sean W. Malone|8.21.09 @ 9:29PM|#

Ohhhh.... you meant gold showers...

:P

Future Guy|8.21.09 @ 9:34PM|#

Isn't the world ending in 2012, anyway?

I'm posting from 2125, and the world's still here. Sorry to disappoint.

Oh, but if you meant "in a metaphorical sense", it ended in 2010.

qwerty|8.21.09 @ 10:48PM|#

What's wrong with gold anyway?

The main problem is that the vast majority of it is outside the US. I'd rather foreign governments not be in charge of our money supply.

|8.22.09 @ 12:10AM|#

I'd rather foreign governments not be in charge of our money supply.

Dude, that ship sailed a long time ago with the Eurodollar (and later Chinadollar) phenomenon. And most of the gold in the world has always been outside the US, yet we survived 150 years with a gold standard.

LarryA|8.22.09 @ 1:41AM|#

This week brings another "surprise" increase in jobless claims. You might not be all that surprised.

I happen to be one of the jobless, having lost my position at a non-profit due to funding cuts. Yesterday I submitted a resume. The person who accepted it told me they advertised the same position two years ago, and ended up with four applications. This time, early in the process, they already have twenty-two. This in a small town of 22,000.

Ray Gardner|8.22.09 @ 2:42AM|#

The perverted irony is of course that Bernanke's one published book (the only one I know of anyway) is a treatise on the Great Depression.

Where did he disconnect from being a moderately respected scholar on the Great Depression to this bumbling man behind the curtain?

Sean W. Malone|8.22.09 @ 2:55AM|#

Ray;

Bernanke has co-authored a number of collegiate Economics textbooks as well... However, his knowledge of the Great Depression was tainted both by Milton Friedman's somewhat incorrect assessment of its causes as well as his own proclivities to neo-classical Keynesianism.

Friedman blamed the New York Federal Reserve's contraction of the money supply for the Great Depression - and ultimately, this is a proximal rather than ultimate cause. Much like today, the Fed fueled a bubble economy throughout the "roaring" 1920s - then when it collapsed under it's own weight, the stock market crashed and the Fed in NY responded by failing to provide the cash needed to it's area banks, which then experience some runs and crashes, and the rest is - as they say - history.

Unfortunately, the ultimate cause was the expansion of the money supply and misallocation of resources - just like today, but that one-time tightening during the initial collapse was the thing that knocked the dominoes over. But as a result, it's given people like Bernanke (and Friedman to an extent) an improper fear of deflation.

Anyway, I have to assume that the rest of Bernanke's Great Depression book would have benefited immensely from a better reading of Murray Rothbard.

|8.22.09 @ 3:28AM|#

we survived 150 years with a gold standard.

We didn't just survive with it, we had economic growth unprecedented in human history.

-jcr

|8.22.09 @ 4:14AM|#

Damn you, Douglas Gray, that was MY comment!

;-)

|8.22.09 @ 5:59PM|#

America had a gold standard for 150 years? Hold on thar, pardners. The gold standard was introduced in 1880 and lasted to 1933, with a hiatus during and after World War One. About 50 years, not 150. Between 1862 and 1880 was the greenback era, when currency was backed with government bonds. Before 1862 there was basically unregulated banking, banks held reserves (usually, and except when they could get away with not holding them) but not necessarily gold.

Let's not invent a golden myth.

|8.22.09 @ 11:01PM|#

dirty rotten so and so's I cant stand when a government keeps lying to you.

I visit http://www.forecastfortomorrow.com/news regularly and he has been spot of for ages now...they have set us up

bernanke two step continues.....these greedy bankers have what is coming

printer cartridge supplies|8.23.09 @ 9:57AM|#

Even if the recession is over the recovery phase will still eat a lot of the world's monetary budget. Visit printer cartridge supplies if you have time.

|8.25.09 @ 10:30AM|#

What is going to happen when the fiscal year ends for the federal government? The feds assets are 2 and half trillion and the outstanding debts are more than 10 times at plus 24 trillion.

That doesn't count either the off book derivatives debts estimated at over one and a quarter quadrillion.

This is not a recession, this is the end of the world's economic system. There is no saving it. Anybody that thinks this is a recession or depression it a total fool and idiocy will be proved by this winter.

If trade is able to continue this collapse of "biblical proportions", then we will see Wiemar Germany type inflation until all trade ceases and chaos takes over the streets.