Low GDP numbers put more weight on Bernanke speech

Federal Reserve Board Chairman Ben Bernanke testifies during a hearing before the House Financial Services Committee on Capitol Hill in Washington, DC.

Stacey Vanek-Smith: The country's GDP grew a dismal 1 percent in the second quarter. Gross Domestic Product is a tally of all the goods and services the country produces; it's considered to be the measure of economic growth. This will put even more pressure on Federal Reserve Chief Ben Bernanke -- he's giving a highly anticipated speech later today.

Jill Schlesinger joins us now, as she does every Friday. She's editor-at-large for CBS/Moneywatch. Good morning, Jill!

Jill Schlesinger: Good morning.

Vanek-Smith: So Jill, what do you think of these economic growth numbers we're seeing this morning?

Schlesinger:Well let's be honest -- they stink. The U.S. economy grew by only -- basically a half a percent in the first whole half of the year? My goodness! And so the current recovery, which began two years ago, has seen annual growth of about 2.5 percent -- that's less than half the rate enjoyed during previous recoveries. This is really worrisome because indebted consumers and cautious corporations don't seem ready to propel our limping economy.

Vanek-Smith: Federal Reserve chief Ben Bernanke is speaking later today. The markets have been gyrating all week in anticipation of this speech -- why is that? Why is this such a big deal?

Schlesinger: Well, at this conference last year, Bernanke signaled that the Fed was considering buying bonds to boost the then-stalling economy. That was the first time we heard about Quantitative Easing --

Vanek-Smith: Quantitative easing, right?

Schlesinger: Right. And you know, the effect of that announcement was to spark a big, 20 percent multi-month stock market rally. So investors are really keyed in on what he's going to say today.

Vanek-Smith: Did Bernanke's actions last year -- Quantitative Easing -- make a difference to the economy?

Schlesinger: The Fed had hoped that the last round of bond-buying would lead to more robust growth. But in hindsight, we know it didn't. We have these GDP numbers as proof. QE2 didn't improve the employment picture, it didn't help housing. And you know, with the recent sell-off in global stocks, we know that bond-buying only boosted stocks temporarily. So, I got to be careful in worrying about whether Bernanke's going to save us this time around.

Vanek-Smith: Jill Schleshinger of CBS/Moneywatch, thank you.

Schlesinger: Thank you.


For more analysis of Ben Bernanke's speech read Jill's blog post.

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