With consumer confidence at a record low, home prices in record decline, a major stock-market index at a 12-year low, stocks selling so low that the New York Stock Exchange is considering listing penny stocks and major retailers reporting a significant decline in profits, we may be grasping at straws here. BUT:
Federal Reserve Board chief Ben Bernanke is telling Congress that the recession could — could — end this year and we’ll be on our way to recovery next year. He called that "a reasonable prospect."
That happy prediction, however, comes with a major caveat — that the $787 billion stimulus package, the $700 billion bank bailout, the $75 billion to stem foreclosures, the money the Fed is pumping into consumer loans, and the near-zero interest rates work.
"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." Bernanke said.
And he added another caveat — if the financial problems of our major trading partners aren’t worse than our own, thus hurting our exports and our financial markets.
Otherwise, all the Obama administration and the Fed have to do is stabilize the job, credit and housing markets so that consumers aren’t afraid of losing their jobs and their homes, recover their confidence and resume spending so companies can start hiring and producing again. This goal is not going to be made any easier by Fed forecasts that the unemployment rate, perhaps the economic indicator with the greatest psychological impact, will close in on 9 percent later this year.
Bernanke told Congress that the Fed believes a "full recovery" may take at least two or three years. We like the "full recovery" part, the two or three years not so much. Still, hand us those straws. We want to grasp them.