Ben Bernanke has declared the recession over.

This leads to one simple question: Why should you care what his recession forecasts are?

Based on his track record as a forecaster and his acumen in identifying economic problems before they exploded, his views on starts and finishes of recessions are, to be blunt, irrelevant.

Recall it was Mr. Bernanke who described the sub-prime situation as “Contained;” it was he who believed Housing would not spill over to the broader economy; and it was he who somehow thought the Bear Stearns situation was a one-off.

I don’t wish to single out Mr. Bernanke; After all, he is an economist, and if you were paying attention, you will note that the entire profession missed the oncoming recession, credit crisis and market collapse. You may also find it helpful to ignore what the profession that cannot forecast yesterday thinks about tomorrow.

Even now, the Federal Reserve Chairman said the recession was “very likely over” as consumers showed some of the first tangible signs of spending again. Never mind that all this retail activity has been driven by government subsidies.

Now, as an investor, you do want to be mindful of the Fed Chief’s economic views, particularly how they pertain to his interest rate policies. The ed has made it clear rates are staying low for the foreseeable future, so this becomes a non-issue in this context.

But his economic forecasts? Don’t bother.

Note that I have not been a particularly harsh critic of the Fed Chair. While he may not be Paul Volcker, he is also (thankfully) not Alan Greenspan.  And we could have done much worse than having a student of the Great Depression, who is also  an out-of-the-box thinker as Fed Chief.

But as a prognosticator? He is no better than his predeccessor . . .


Bernanke: Recession ‘Likely Over’

Fed Chief Says Recession Is ‘Very Likely Over’

Category: Economy, Federal Reserve, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

42 Responses to “Bernanke Says Recession Over; Should You Care?”

  1. aitrader says:

    Gee, and I was so impressed with his depth of thought and foresight in calling the recession before it happened too.

    Glad to have a captain like Big Ben at the helm. I sleep so much better at night.

  2. torrie-amos says:

    well, the facts seems to be they are gaming the market, that’s the trend why would they stop, during some bad retail numbers they announce another “change in accounting rules for reits”, that helps oh me oh my, banks once again………………he got rehired and if he is the good man he portends to be he won’t stop until employment is back in the 6% range

  3. call me ahab says:

    could be over- technically for a quarter or two- but it won’t last- as he has been saying- unemployment is a big problem- and is not going away-

    as past recessions have shown us- it is taking longer and longer to return to pre-recession levels- last recession took 5 years-

    credit and spend is doomed- banks are restricting lending by tightening lending standards, cutting credit lines and raising rates-

    credit contraction is reality- and with a large unemployed populace- demand has nowhere to go but down

  4. [...] würde auch wie Barry Ritholtz meinen, dass man den Worten und Prognosen des Fed Chairman Beachtung schenken soll. Aber: Nur [...]

  5. JasRas says:

    At this point, who cares? It seems as though even if the recession is “over” it is only by statistical fact, not by feel or by economic robustness. Making the GDP positive doesn’t make the economy healthy or even fully functional for that matter.

    In addition, a need to separate the economic data from the market is now necessary because the market is on its own reality plane. One could say it is anticipating better future times, but as Rosenberg writes, it is anticipating a future that NO ONE is forecasting. NO ONE… The loser’s game is to try and game when the economy and market will reconcile. That game has massive career risk for those managing other’s monies. The real game is to manage in the current market while understanding they will reconcile and appreciating that fact and factoring for it… Easy to write, hard to do.

    Factors to consider: we’re on the cusp of a seasonally strong period for markets (Oct-Apr); there are firms that are not encumbered by TARP and those working for them want bonuses this year…; there do not seem to be any exogenous events brewing (consider Bear Stearns gestated nearly nine months, Lehman for seven or so before “blowing up”), the massive bounce has many(most?) looking for a sizable retrace and Mr. Market likes to deny what most are looking for–short term; the market has be event and technically driven and technically we just chewed through 1050. Point and figure has 1140 as next resistance. Maybe a small pullback is order to regroup, but the ceiling has now been raised on the move up. It works until it doesn’t.

    Don’t mistake me for a bull. I think critical errors are being made now in laying the groundwork for a sustainable recovery. These errors imho will extend/exacerbate an already devastating crisis. I hate it. It makes this career a lot less fun, but a lot more necessary.

  6. Jim Bianco says:

    To refresh everyone’s memory, in mid-2007 Bernanke famously and confidently said that the subprime problem was “contained” and would cost the banking system $50 to $100 billion at most. At last count the subprime losses were $1.621 trillion and counting. How did that work out?

    In summer 2008 he worried about inflation as he saw signs that the recession was ending. A few months later the world almost ended.

    So, remind us again why Bernanke’s forecasts are important?

  7. Charles Maley says:

    To get us out of this mess, Big Ben can just print some more debt.
    What Does 11 Trillion+ Dollars Look Like?

    Catch a wave and you’re sittin’ on top of the world – THE BEACH BOYS

    Sooner or later that wave is gonna crest. Is Ben getting ready for that tsunami?

  8. Bruce in Tn says:

    The recession is over,if the government remains fast and loose with the taxpayer’s money. If not, er, not so much….

    Fight Looms in Congress on Tax Break for Home Buyers

    “DALLAS — When Congress passed an $8,000 tax credit for first-time home buyers last winter, it was intended as a dose of shock therapy during a crisis. Now the question is becoming whether the housing market can function without it.

    As many as 40 percent of all home buyers this year will qualify for the credit. It is on track to cost the government $15 billion, more than twice the amount that was projected when Congress passed the stimulus bill in February.”

    Gee, housing for private citizens can’t function without government.
    American automakers….ditto
    Large investment banks…ditto
    Commercial Real Estate?
    Idiot graduate students?
    and so on….

  9. cvienne says:

    I thought his job was to focus on that “dual mandate” thingy about maintaining employment numbers and “price stability” (whatever that means, I guess somewhere between deflation and inflation is valid)…

    So what’s all this about getting into the game of calling “recessions”?

    Is he trying to get some overtime pay?

  10. says:

    Utter and absolute INEPT moron!

  11. cvienne says:


    Probably a good chunk of those 40% who actually DO qualify for a home (based on their credit), are doctors that are now going to get shoved out to make way for healthcare reform…

    …and the band played on!

  12. snapshot says:

    Barry – Thought you’d like to know:

    “Moody’s, S&P May Face More Disclosure, Liability in SEC Rules”
    Bloomberg – Jesse Westbrook

  13. madman130 says:

    Yup I agree.

    Enter depression….

  14. Bruce in Tn says:

    I’ve had a few more minutes to cogitate on the notion of recovery…after all that is what you have once the recession is over, isn’t it?

    If we are now in recovery there are plenty of zebras still left where you should be seeing horses.

    Recovery if the federal funds rate is left at zero? My what big muscles we have…
    Recovery if the taxpayer money to the car companies won’t be paid back. I believe we heard that admission from government within the last few days.
    Recovery if student loan funds must be increased next year? Yep, read about that too.
    Recovery if the government owns at least 60% of GM…
    Recovery with record high unemployment that, assuming this is a lagging indicator, is still increasing.
    Recovery with unemployed running out of benefits due to extreme length of unemployment.
    Recovery with a massive shadow inventory of unsold homes
    Recovery with CRE getting worse by the month.

    …point is, this recovery thing, at least in my experience, has never before been government dependent. Yes, governments always spend more when recessions hit. But in this case, there appears to be no way to lessen government dependence probably for years. Faux recovery would be more like it…

  15. arogersb says:

    You say that economists “missed the oncoming recession”. Remember that Greenspan warned about an upcoming housing mess in 2005 in a congress hearing.

  16. Bruce in Tn says:


    Medicare is assuming they are going to cut the cost of medical care by decreasing payments to various entities across the board for 2010. As we’ve talked the last few days, if this happens, you will see boomer MD’s retire en masse. This, I think, is the real outcome, and not just some idle speculation on the part of a blogger. We had our group meeting last night, and I am sure, based on the discussion, that all my partners are considering all options. Including not taking medicare.

  17. BR,

    w/ this: “I don’t wish to single out Mr. Bernanke; After all, he is an economist, and if you were paying attention, you will note that the entire profession missed the oncoming recession, credit crisis and market collapse.”

    what’s up w/this: “…note that the entire profession missed the oncoming recession, credit crisis and market collapse.”

    the entire profession? (of Keynesian Econonomists, perhaps?)

  18. call me ahab says:


    VAT –

    at some point the USG will have to show some credibility re deficits- and the VAT will be the easiest way to get the $$$-


    “did i say no middle class tax hikes?” “of course not- I am going to tax everybody”

  19. aitrader says:

    Has anyone noticed the USD fell off a cliff today? Ominous.

  20. crosey says:

    I think that I’m just, plain cynical.

    I think that the global economy is clinging to a razor’s edge, leaders know it, and Ben is measuring his words on the hopes that the abyss will be avoided.

    Open question to anyone reading… there anyone in government, anywhere in the world, who not only has a clue, but can formulate and (more importantly) execute a plan?

    It just feels like leadership in both the private and public sector are madly grabbing for as much cash as they can, looking over their shoulders at the approaching demise, content to do nothing but serve themselves.

    It’s a shame.

  21. cvienne says:


    Bernanke (central banker par excellence)…

    “Look by golly at what what a great central banker I am… I make our currency worthless and get us out of a recession… Where would you like me to show up for my book signing”?

  22. cvienne says:


    “It just feels like leadership in both the private and public sector are madly grabbing for as much cash as they can, looking over their shoulders at the approaching demise, content to do nothing but serve themselves.”

    I made that same statement in a thread yesterday (in a ‘metaphorically colorful’ manner, mind you)…

    I was promptly put back in my place by karen who feels that there is ‘decorum’ in raping & pillaging…

  23. Jim Greeen says:

    I know the world is NOT waiting for my evaluation of our boy Ben’s day at the Brookings Instituion yesterday. So I will try to keep it brief as well as civil.

    Ben’s quote, “The general view of forecasters is that growth in 2010 will be moderate, less than you might expect given the depth of the recession,”

    My question is there is any group that has been more disparaged in this financial crisis than economic forecaster???? Anybody??? It is unconscionable he cites this group for more that the correct time of day for Christ sakes. How in the name of the sweet baby Jesus can you, as the Chairman of the Federal Reserve Bank of the United States, with the world hanging on your every word possibly referrence this totally disgraced group as evidence of anything? As Johnny Mac might say, “You have got to be kidding me.” Yet he did it!!!

  24. jturner says:

    Very good post. I especially like how you point out that investors do want to be mindful of his economic views, even though he has a lousy track record at predicting future economic trends. As an example, Bernanke has made it pretty clear that the Fed is trying to prevent deflation at all costs, and here is an interesting article I read on what this may mean for investors going forward.

    The easy money policies of the Fed, while having stabilized the economic downturn and caused a massive rally since March, come with severe consequences that will eventually effect the markets in a not so positive way, in my view. The Fed’s actions have also caused the dollar to sink to new lows for 2009, and the gold price to rise to new highs. I feel this trend will continue so long as the easy money policies are maintained.

  25. Stuart says:

    Bernanke, like Geithner, is bought and paid for. No longer meaningful other than another Baghdad Bob type mouth breather.

  26. beaufou says:

    @Jim Greeen

    My question to Bernanke is:
    You are the chairman of the Federal Reserve and you need to quote someone else when asked what your opinion is?
    Is it because you have no f-ing clue?

  27. Pat G. says:

    Ben’s doing a fine job, leave him alone. The saps who believe that the recession is “technically” over will be pulling their cash from between their mattresses and putting it to work by buying riskier assets, on a worldwide basis. This will then put downward pressure on the dollar as the reflation trade gets stoked. Which is great for precious metal prices and foreign currencies of which I own both. These people are absolutely predictable….

  28. beaufou says:

    And what the hell does “very likely” mean, maybe? perhaps? god only knows?

  29. rdhall3637 says:

    Jim, great point! I’ve been harping on the overall inherent “uselessness” of forecasting macro events for awhile. Very, very few predicted the mess we are in now, and the depth of the fall. Those that did, where just lucky it worked out the way they said. They are no more likely to predict the next move than you or I.

    There are world class economists predicting a strong recovery, and other world class economists predicting a double dip collapse.

    I have the only good prediction… most of them will be wrong, whichever way it goes!

  30. HarryWanger says:

    Barry and I are starting to sound eerily similar. Yesterday he confirmed my market call of another 20% on technicals and fundamentals. Today this:

    “And we could have done much worse than having a student of the Great Depression, who is also an out-of-the-box thinker as Fed Chief.”

    Pretty much what I said yesterday, we happened to have the right guy at the right time. Today’s economic numbers could not be any better. Combined with yesterday, this rally is on the move!

  31. batmando says:

    @ call me ahab at 9:05 am
    VAT –
    “of course not- I am going to tax everybody”

    of course, the people are going to foot the bill, one way or another. VAT, the most regressive tax, will be the most efficient way to do so.

  32. rootless_cosmopolitan says:

    More good news to further fuel the stock market rally:

    “U.S. Credit-Card Defaults Resume Ascent as Unemployment Worsens”

    Here, we go. Another 20% from here!


  33. Onlooker from Troy says:

    Indeed, we’re “recovering” on the back of the wealth of future generations; my aren’t we great. You should be proud America. Somehow though I don’t think anything like “The Greatest Generation” will be used to describe this era by our descendants.

  34. Halp says:

    LOL I know what he meant… The recession is over and the depression is about to begin. It’s and “IS IS” thing.

  35. Had Enough says:

    I seem to be out of Grey Poupon… wrote:

    I was wondering when he was going to announce the good news to all the naysayers. People like me have known for a long time now that we had come out of the recession. P/E ratios are nearly back to pre-crash levels and healthy leverage is being encouraged again. I have also noticed that the boys are out early filling up the tee off slots nearly each morning again at the club and all my friends and relatives have begun to look for extra staff at their vacation homes before the holiday benefit cycle begins this fall.

    Perhaps the financial media and you doomsters on this blog are failing to see that the data is indicating that we have safely passed a minor recessionary dip as our Fed chief states, just like many others we have faced and avoided in the recent past thanks to the wisdom and altruism of selfless, unappreciated patriots like Bernanke, Geithner, Snow, Summers, Paulson, Greenspan, and many others (the list goes on.)

    I really can’t see just what all the fuss has been about regarding the employment numbers and consumer spending and debt. After all, I’ve been collecting bonuses for my investment banking gig without interruption since the start of this so-called crisis. Never once was I afraid for my job or my coworkers’ jobs or my career’s future. In the end, no one in my division was fired even though we had some very substantial losses and had to ask Uncle Sam for a little help along the way last year. You never certainly never heard any of us complaining about the extra workload we had to take on after the government’s nosy bureaucrats got involved.

    Life has taught me that for nearly all industries – mine included – in the end, the deserving winners are duly rewarded from the proceeds of their hard work and skill, while management takes advantage of the down market to get rid of the dead wood. Perhaps overall, despite a fairly robust economy we still have to strip out a bit more of the dead wood before we get back to where we should be. Of course this process is going to be uncomfortable for a few, but if you’re like me you will do just fine.

    The lesson to be gained from all this for the dead wood employee is the following: Upgrade your skills and get working. The global economy or the government doesn’t owe you an education or a living.

  36. “In Conference Room B we will be parsing the meaning of “Is”..

    Snacks and Refreshments will be served, a fun time should be had by all..”

    as an aside:

  37. [...] light of my earlier Bernanke post, my friend Scott sends this [...]

  38. bergsten says:

    This is an old joke about economists that no doubt you have all heard before.

    I post it here because there is a better worded version. The better telling (from the second “Adam Smith” — George G.W. Goodman whose writings of 40+ years ago are the only things I’ve read about the market that have any end-to-end ring of truth about them at all — and thus are all out of print):

    “Three men are stranded on a desert island and all they have is a can of tuna, but the tuna is inside the can and the men are starving. The first man, a physicist, suggests a way to make a fire hot enough to melt the can. The second is an engineer, who is thinking up a complicated slingshot that will hurl the can against a rock with enough force to puncture it. The third is an economist. He has the answer. He says, “assume a can opener.”

    Economists find this funny — “I” wonder how this one-meal’s-worth-of-tuna is going to improve their situation.

    Open that damn can of tuna and happy days are here again! No more recession (except in CA — see next post).

  39. bergsten says:

    State (CA) May Lag Nation in Recovery

    The recession is really over. The only reason you don’t notice is that IT’S OVER FOR EVERYBODY ELSE EXCEPT YOU. Let’s go out and celebrate! Better still, let’s move to where these alleged better conditions exist.

    Isn’t this just wonderful reporting? What a concept — something is true because it’s outside your area of direct observation so you can’t personally refute it!

  40. bergsten says:

    Oh yeah, I was told to mention CNBC Sucks in my posts, not sure why.

  41. bergsten says:

    Stale thread, I know, but I thought this was pretty inspirational, if I do say so my own self…

  42. [...] that the recession’s “likely over,” but Big Picture blogger Barry Ritholtz brings up an interesting point. Considering Bernanke’s track record as a forecaster, why does anyone [...]