The U.S. economy should continue to grow this year and next, but the pace won't be strong enough to fix the job market and cut a huge budget deficit, the Federal Reserve chief said Wednesday.
Fed Chairman Ben Bernanke told the House Budget Committee on Wednesday that a continued increase in consumer spending and business investment should make up for a fading government stimulus in lifting the economy....
He said the U.S. budget deficit should narrow over the next few years as the economy and financial markets continue to recover. But without further policy actions that won't be enough, Mr. Bernanke warned, because the economy's recovery is expected to remain moderate.
The Fed chairman said the recovery won't be fast enough to put 8 million people back to work in a short period. He also cautioned the housing market remains soft
This is hilarious. First, in the years preceding the 2008 crises, he insisted that the fundamentals of the economy were "strong." Then, ever since 2009 he has repeatedly said that worst of the current crises was over and 2010 will mark a year of remarkable recovery. Now that 2010 has obviously not been a year of recovery, he is saying that it will undoubtedly grow but just slowly. What is the most telling, however, is how he insists this despite the fact that the U.S is in an unprecedented debt crises.
I contend that not only is Bernanke wrong this time, but wildly incorrect, the rest of 2010 and 2011 will not be a period of recovery. It will instead be a period of severe hardship. I suspect that the contraction that we will witness will be of similar proportions as the Great Depression in 1929-1933.
I would be remiss, however, if I neglected to commend him for at least coming to the obvious conclusion that the U.S. budget deficits aren't sustainable.