Fed’s Bernanke Sees More Robust Second Half 2011

Yesterday the Federal Reserve Chairman, Ben Bernanke, stated that current U.S. gross domestic product (GDP) growth is slower than the Federal Reserve had anticipated, but that nonetheless, he expected a more robust GDP growth in the second half of 2011.

Analysis: I am not sure what data Ben Bernanke is looking at that lead to certainty of a more robust second half of 2011 GDP growth rate.  We still have:

• rampant unemployment and underemployment;
• consumer confidence which is flat to slightly down;
• slowing manufacturing growth, which is usually a presage to a slowing economy and often a recession;
• a Chinese economy that is still overheated;
• a lingering Greek debt crisis;
• a looming debt crisis in the United States;
• stunted economic growth in Japan due to the earthquake;
• a collapsed housing market in the United States, which is an economic sector that hires many blue collar workers;
• U.S. corporations sitting on trillions of dollars of unspent cash;
• continually rising commodities prices;
• continued unrest in the Middle East, that looks unlikely to abate soon; and
• generally not much good news out there

It is rare for the Federal Reserve to “talk up” the economy, but it appears to me that is what Bernanke is doing.  I just cannot see what he is apparently seeing.  It’s not that I am a bear on the U.S. economy; I am not.  After all, you and I are both working hard to do our jobs well and find ways to make our lives better.  Those are the solid economic foundations underneath.  However, I could not use the word robust to describe what I anticipate.

Separately, the Federal Reserve is sticking to its plan of ending its monetary expansion policy of Quantitative Easing, or QE.  I am glad that they are easing this policy of printing money.  It is not surprise to me that the economy is starting to see some inflation after the preceding three years of injecting trillions of dollars into the economy.

Importance grade: 5; what the Federal Reserve Chairman thinks is important.  However, reality trumps the Fed Chairman’s opinion, and the reality appears to be that the U.S. economic growth is flattening.  So it is difficult to put credence into Bernanke’s words.

Jason