So, Fed Chairman Ben Bernanke went up to Capitol Hill to talk with Congress about the state of the US economy.
He sees some trouble ahead.
According to Lou Barnes:
Federal Reserve Chair Ben Bernanke made his best speech by far in testimony to Congress [last week]. He was at ease in demeanor for the first time, and also for the first time displayed quick adaptation to unpleasant news, in particular signals from markets. He acknowledged that the subprime matter is serious, not confined to that market, and housing will get worse before better — both revisions of near-term previous thinking.
It takes guts to make a public estimate of losses in the mortgage fiasco (“$50 to $100 billion”), knowing for sure that it’s too early to be correct, that losses are likely to be larger but unpredictably so, willing to run the risk of spooking a crowd already jammed in the exits but placing high value on plain speaking.
Bernanke knocked .25 percent off forecast GDP (now mid-2 percent range through 2008), and stuck with a forecast for increasing unemployment. He’s going to lean into the economy long enough and hard enough to keep inflation in the box, and housing is on its own.
Me? I don’t know. I’m still thinking things will turn out alright. I mean, if the way things are today are pretty much the way things are going to stay for the next year or two, it’s good enough, right?
Even if what Bernanke predicts comes true, we’ll still have relatively low unemployment, steady home prices, and low inflation.
Sounds good to me.
Read on: Bernanke: Housing will get worse – By Lou Barnes, Inman News, by way of The Boston Globe
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