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Global Economy Flatlining Says Bernanke But The Good News Is...

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http://www.bloomberg.com/apps/news?pid=206...id=alIvVPlOgkdc

Bernanke Says Global Economy Emerging From Recession (Update3)

By Craig Torres and Scott Lanman

Aug. 21 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke said the global economy is beginning to emerge from recession after “aggressive†action by central banks and governments.

“Economic activity appears to be leveling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good,†Bernanke said today in a speech at the Kansas City Fed’s annual symposium in Jackson Hole, Wyoming.

Bernanke, speaking to an audience of central bankers and academics, warned that the world still confronts “critical†challenges. The note of caution underscored the Fed’s decision last week to leave interest rates near zero for an “extended period†and to delay by a month the scheduled end to its $300 billion program to buy U.S. Treasuries.

“Strains persist in many financial markets across the globe, financial institutions face additional significant losses and many businesses and households continue to experience considerable difficulty gaining access to credit,†Bernanke said. Recovery “is likely to be relatively slow at first, with unemployment declining only gradually from high levels.â€

While economists predict the U.S. will return to growth this year, they say the jobless rate is likely to rise beyond 10 percent, restraining consumer spending and casting a cloud over the strength of the recovery.

‘Serious Danger’

The U.S. economy “is still weak and it’s not at all clear that the upturn that we’ve seen recently is the beginning of a sustainable rise,†Harvard University economist Martin Feldstein said in a Bloomberg Television interview in Jackson Hole. “There’s a serious danger that come the end of this year and the beginning of next year we will see it slipping back down again.â€

Economists forecast the U.S. economy will expand at a 2.2 percent annual rate in the third quarter, according to the median estimate in an August survey by Bloomberg News. The International Monetary Fund last month predicted the world economy will grow 2.5 percent in 2010 after contracting 1.4 percent this year.

“The worst of the credit crisis probably ended in March and the recession probably ended in the current quarter,†economist David Jones, president of DMJ Advisors LLC in Denver, said today in an interview on Bloomberg Radio.

Germany, Japan

Signs are emerging that growth is resuming in other countries, with Japan, Germany and France all expanding in the second quarter. The Paris-based Organization for Economic Cooperation and Development said Aug. 19 that the economy of its 30 members was flat in the second quarter after contracting 2.1 percent in the previous three months.

A 7.2 percent jump in existing U.S. home sales last month, reported today by the National Association of Realtors, added to evidence the housing crisis is easing. Purchases climbed to a 5.24 million annual rate, the most since August 2007.

U.S. stocks gained for a fourth day, with the Standard and Poor’s 500 Index rising 1.8 percent at 4:01 p.m. in New York. Benchmark 10-year notes yielded 3.57 percent, up 14 basis points from yesterday.

European Central Bank President Jean-Claude Trichet said it’s too soon to say an economic recovery can be sustained and policy makers need to maintain efforts to restore confidence.

“I am a little bit uneasy when I see that because we have some green shoots here and there, we are already saying, ‘Well after all we are close to back to normal,’†Trichet said at the symposium. Bundesbank President Axel Weber said at the gathering that it’s “too early to say it won’t be a bumpy road ahead.â€

IMF Forecast

The IMF may raise its forecast for the global economic rebound, John Lipsky, the fund’s first deputy managing director, said in an interview yesterday in Jackson Hole.

A “strong and unprecedented international policy response†averted “the imminent collapse of the global financial system,†Bernanke said. The Fed has “consistently maintained†that the failure of a large, interconnected financial institution would have dire consequences for markets and the economy.

“We have therefore spared no effort, within our legal authorities and in appropriate cooperation with other agencies, to avert such a failure,†he said. “The case of the investment bank Lehman Brothers proved exceptionally difficult, however.â€

The Fed chairman reiterated that Lehman had inadequate collateral to merit a Fed loan “of sufficient size to meet its funding needs.†The government also lacked the authority to inject capital and sustain the firm, he said. Lehman Brothers Holdings Inc. filed for bankruptcy in September.

Concerted Action

“Although concerted policy actions avoided much worse outcomes, the financial shocks of September and October nevertheless severely damaged the global economy -- starkly illustrating the potential effects of financial stress on real economic activity,†Bernanke said.

At last week’s meeting, Fed policy makers extended their program to buy long-term U.S. Treasuries through October, aiming to ensure a “smooth transition in markets.†They also affirmed a pledge to keep interest rates near a record low even as they determined the economy is “leveling out.â€

Since the collapse of Lehman, the Fed has bought as much as $350 billion of short-term debt issued by companies including General Electric Co. and expanded currency swaps with other central banks to aid financial firms outside the U.S.

Debt Purchases

Bernanke has also led policy makers in a reduction of the benchmark interest rate almost to zero and in the purchase of as much as $1.75 trillion of Treasuries and housing debt.

“As severe as the economic impact has been, however, the outcome could have been decidedly worse,†Bernanke said. “Unlike in the 1930s, when policy was largely passive and political divisions made international economic and financial cooperation difficult, during the past year monetary, fiscal and financial policies around the world have been aggressive and complementary.â€

Policy makers must now rewrite regulations to reflect lessons from the crisis, and that will prevent “a recurrence of the events of the past two years,†he said.

President Barack Obama has yet to indicate whether he will nominate Bernanke for a second term as Fed chief after his current term ends Jan. 31.

Feldstein endorsed Bernanke for a second term. “He certainly deserves it. He has done a remarkably creative job of dealing with these problems,†Feldstein said.

Investors and traders see reappointment as increasingly likely. Yesterday, futures contracts on the Web site Intrade showed a 79 percent chance Bernanke will be tapped for a second term.

...at least I think that's what he said. But maybe I need to hear it on a Maxell

http://www.youtube.com/watch?v=-DP89iMe0BY

Clearly, I should have used this Youtube link:

Or this one:

Edited by AvidFan

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Get that bubble re-inflated.

If theres any more proof you need that central banks and governments are the cause of booms and busts - bubble'omics at its best.

Next stop - insane stock market - insane house prices - insane commodities - insane price for a loaf of bread. These guys really need a good kicking.

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http://www.nytimes.com/2009/08/22/business...mp;ref=business

Central bankers from around the world expressed growing confidence on Friday that the worst of the financial crisis was over and that a global economic recovery was beginning to take shape.

“The prospects for a return to growth in the near term appear good,†declared Ben S. Bernanke, chairman of the Federal Reserve, offering optimism both about the United States and the worldwide outlook.

Though the Fed chairman repeated his warning that the economic recovery here was likely to be slow and arduous and that unemployment would remain high for another year, he went beyond the central bank’s most recent statement that economic activity was “leveling out.†Speaking to central bankers and economists at the Fed’s annual retreat here in the Grand Tetons, Mr. Bernanke echoed the growing relief among European and Asian central bankers that their own economies had already started to rebound.

Even as they indulged in a bit of self-congratulation over what had been achieved since the financial crisis of last year, these central bankers were beginning to focus quietly on another big task, how they will unwind the vast emergency measures they put in place to fight the crisis.

At almost the same time that Mr. Bernanke spoke, the National Association of Realtors reported that sales of existing homes jumped 7.2 percent in July — the biggest monthly increase in more than a decade and much bigger than analysts had expected.

Investors reacted ebulliently to both the housing news and to the Fed chairman’s remarks. The Dow Jones industrial average jumped as soon as the markets opened and ended the day up 155.91 points, or 1.67 percent, at 9505.96. Though stock prices are far below their record highs, the Dow has risen 45 percent from March and is at its highest point this year.

Shares of major home builders surged on the improvement in home sales, which was the fourth monthly increase in a row. While forecasters had expected a gain, the size of it jolted investors.

But stocks for a wide range of other companies climbed higher as well, as did the prices of oil, copper and gold. Shares climbed for industrial companies, energy producers and manufacturers of chemicals, plastics and other basic materials.

“This is a bull market,†said Laszlo Birinyi Jr., president of Birinyi Associates, who said he was investing in large banks, well-established technology companies like Apple and big industrial companies like 3M and United States Steel. “There’s just a desire to be in the market and hope that the train will again leave the station.â€

Here in Jackson Hole, the mood of relief and cautious confidence among central bankers and economists on Friday was almost palpable — a stark contrast to the anxiety and tension that permeated their retreat here one year ago.

“It is reasonable to declare that the worst of the crisis is behind us, and that the first signs of global growth have appeared earlier than we generally expected nine months ago,†said Stanley Fischer, governor of the Bank of Israel and a top former official at the International Monetary Fund.

The inconsistency in reporting is amazing.

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MOP thread

http://www.cnbc.com/id/32509147

Central banks should consider making some of their existing emergency liquidity programs permanent to minimize the stigma of accessing central bank credit, a top Federal Reserve board staffer said Friday.

"They should consider whether some now-existing arrangements such as the Term Auction Facility and similar mechanisms, need to be adapted and made permanent, or new facilities established, so that the stigma of using central bank credit is minimized, especially in future crises," Brian Madigan, director of the Fed's Division of Monetary Affairs, said in remarks prepared for deliver to a conference.

The Fed uses its discount window to lend directly to banks, but some firms are wary of tapping it on concern it will be perceived as a sign of weakness.

"The problem of discount window stigma is real and serious," Madigan said. "The intense caution that banks displayed in managing their liquidity beginning in early August 2007 was partly a result of their extreme reluctance to rely on standard discount mechanisms."

So we are going to start unwinding emergency programs by making them permanent????

Doublethink going on?

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These people talk such drivel. It's hilarious.

How can it be drivel?...they are the best of the best of the best paid anywhere. they need to be, otherwise they would be headhunted.

Edited by Bloo Loo

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problem is

most people still think they know what they are talking about

these experts need to become irrelevant and the sooner the better

That's because they talk in over complicated sentences and use words that the majority of people aren't familiar with.

It's like talking to a doctor you assume because they are using medical terminology that they are competent in what they are doing, however the use of terminology can mask incompetence.

Edit put are instead of aren't

Edited by interestrateripoff

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That's because they talk in over complicated sentences and use words that the majority of people are familiar with.

It's like talking to a doctor you assume because they are using medical terminology that they are competent in what they are doing, however the use of terminology can mask incompetence.

yep

but those teachers that can explain a subject in simple terms are the ones that truly understand the subject

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Bernanke hopes against hope. Because if the economy doesn't recover, after all the looting.

"Hello Mr Bernanke.. meet Mr Pitchfork..."

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