Bernanke: Economy Slowing, GDP Flat in 1H ’08

Fed Chair Bernanke is testifying in front of the Joint Economic Committee on The economic outlook for the US.

Key takeaways:

Credit
- Recent Fed actions appear to have helped stabilize the situation somewhat;
- Financial markets remain under considerable stress;
- Pressures in short-term bank
funding markets have
increased once again;
- Lenders have been reluctant to provide credit to
counterparties, especially leveraged investors, and have increased the amount of
collateral they require;
- Corporate debt market yields and spreads have been falling more
recently

Labor, Wages & Income
- Demand for labor has also moderated
- Claims for unemployment insurance have risen
- Unemployment is expected to move higher in coming months
- Declining home values and tighter credit conditions, have caused consumer
spending to decelerate considerably
- Tax rebates, fiscal stimulus package recently will provide some support to consumer spending in coming quarters;

Inflation
- Real disposable income increased at only about a 1 percent annual
rate, reflecting weaker employment conditions and higher prices for energy and food;
- Price index for personal consumption expenditures rose 3.4 percent%
- Sharp increases in the prices of crude oil and agricultural products;
- Decline in the foreign
exchange value of the dollar has boosted some non-commodity import prices;
- We expect inflation to moderate in coming quarters.

Conclusion
"Clearly, the U.S. economy is going through a very difficult period. But among
the great strengths of our economy is its ability to adapt and to respond to
diverse challenges. Much necessary economic and financial adjustment has already
taken place, and monetary and fiscal policies are in train that should support a
return to growth in the second half of this year and next year. I remain
confident in our economy’s long-term prospects."

This morning on Bloomberg, a headline crossed stating that Bear Stearns had approached the Fed to discuss the plans of their imminent bankruptcy filing.

Video:

Sg2008040236655

Questions about Bear Stearns are expected to dominate the Q&A portion.

Fed_panic_button

Source:
The economic outlook
Chairman Ben S. Bernanke
Before the Joint Economic Committee, U.S. Congress, April 2, 2008
http://www.federalreserve.gov/newsevents/testimony/bernanke20080402a.htm

Fed Aided Bear Stearns as Firm Faced Chapter 11, Bernanke Says
Yalman Onaran
Bloomberg, April 2, 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=a7coicThgaEE&

Related:
What Congress and Investors Should Understand About the Bear Stearns Deal
John P. Hussman, Ph.D.
March 31, 2008
http://www.hussmanfunds.com/wmc/wmc080331.htm

Fed Should Clarify Link to Bear Stearns Assets
Caroline Baum
Bloomberg, April 2, 2008
http://www.bloomberg.com/apps/news?pid=20601039&

Category: Economy, Federal Reserve, Inflation

TrimTabs: Its a Recession, and Its Already Over (Wrong)

Category: Data Analysis, Economy

Jubak on the Paulson Plan

Category: Markets, Taxes and Policy

Meta Recursive April Fool’s

Category: Markets, Psychology

Media Appearance: Kudlow & Company (4/01/08)

Category: Media

BEAR MARKET RALLY

Category: Economy, Markets, Psychology, RR&A

NY Fed Map Tool

Category: Credit, Federal Reserve, Real Estate

Housing slump comes to the Hamptons

Category: Economy, Finance, Real Estate

Inflation Pinch

Category: Financial Press, Inflation, Psychology

Internet Hoax Gooses Stock Market

Category: Financial Press, Markets, Short Selling, Trading