Wednesday, July 22, 2009

Bernanke to Senate: The Consumer Needs to Spend and They are Not

The article below is printed from CNN/Money. You can read the original by going here.

The reason I reprinted the entire piece is because I wanted you to have an illustration of absurdity right before your eyes. Here is Ben Bernanke telling Congress what needs to happen to help the U.S. economy knowing all to well it is precisely what is NOT happening. And NOTHING is going to make the U.S. real estate market improve until the U.S. economy improves.

Bernanke knows, for example, that Americans are not spending money despite his best desires that they would. Americans now have the highest savings rate since 1952. Wouldn't you save money too if you thought you would lose your job any day?

As to Bernanke's "let's state the obvious" comment that the economy is recovering when more jobs are being created, great news. But Bernanke ignores the simple fact reported by the Bureau of Labor Statistics that 7.2 million people have lost their jobs since this recession officially began in December 2007 and just last month alone another 433,000 joined the ranks of the unemployed.

Only in America do politicians talk of improvement through solutions when they know precisely the opposite is happening.

No, correction. Only in Washington D.C.

Robert J. Abalos, Esq.


WASHINGTON -(Dow Jones)- U.S. Federal Reserve Chairman Ben Bernanke told a Senate panel Wednesday that the shape of the economic recovery depends primarily on the evolution of the labor market and the health of the U.S. consumer.

Bernanke added that Fed officials expect a recovery to start off relatively slow, partly because consumers are grappling with high debt and housing price declines.

"We don't expect the consumer to come roaring back by any means," Bernanke said, adding that the American consumer isn't going to be the source of a global boom. He said U.S. officials are encouraging trading partners in Asia and elsewhere to substitute their own domestic demand for the American consumer. And we're seeing, for instance in China, "some motion in that direction," Bernanke continued, highlighting China's large fiscal stimulus package.

Responding to questions from lawmakers, Bernanke said that without the controversial $700 billion Troubled Asset Relief Program, or TARP, the economic recession would have been very deep and protracted and almost like a depression.

"The situation now is very poor," he said. "Americans are suffering. But I do believe we have a much better situation today than we would have if we had seen a collapse of the financial system last October."

Bernanke declined to wade into how to expand coverage and improve care in the healthcare system, beyond urging that the issue of cost remain on the "front- burner."

"Any program that is undertaken should look to how we're going to get control of costs so that it will not bankrupt both our government and eventually the economy," he said.

He added that troubles in both the commercial and residential real estate markets could continue to cause problems at banks.

"The systemic risks today I think come from the fact that the financial markets are still unstable," said Bernanke.

U.S. Sen. Charles Schumer, D-N.Y., meanwhile, said CIT Group Inc.'s (CIT) problems have made it clear that small businesses remain vulnerable and pressed the central bank to do more to help smaller firms get loans.

In response, Bernanke agreed that banks are cutting off borrowers who can repay. "Of course it's happening," he said, adding that the Fed is urging banks to loan to creditworthy borrowers. He added, though, that banks' loan terms are likely to be tougher as a result of the crisis and that helping small businesses is "one of the toughest areas" for the central bank."