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Fallout: The Financial Crisis

A reality check on the economy

Steve Henn May 5, 2009
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Fallout: The Financial Crisis

A reality check on the economy

Steve Henn May 5, 2009
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TEXT OF STORY

Kai Ryssdal: Never mind what the calendar says because on Capitol Hill it was Groundhog Day for all those Washington policy types. The Chairman of the Federal Reserve made a repeat appearance before the Joint Economic Committee. But you had to listen pretty closely to hear what Ben Bernanke was actually saying. Because in between the lines about the economy getting better by the end of the year was a carefully worded reality check. Even when the economy does pick up, he said, things aren’t going to be just like they used to. From Washington, Marketplace’s Steve Henn has more.


STEVE HENN: Ben Bernanke told members of Congress this morning the recession is losing steam.

BEN Bernanke: We continue to expect economic activity to bottom out and then to turn up later this year.

The Fed chairman said he saw some glimmers of hope in recent economic data, signs that American consumers might start spending again soon.

Bernanke: In coming months household spending will be boosted by the fiscal stimulus program, and we’ve seen some improvement in consumer sentiment.

And for the last few months, Wall Street has certainly acted as if the worst was already over. Yesterday for a brief moment the S&P 500 was actually up for the year.

Simon Johnson at MIT agrees that the economy is no longer in free fall but…

SIMON JOHNSON: I’m not sure we have really turned the corner in any sustainable fashion.

More than half a million people are getting laid off every month. Unemployment seems likely to push past 10 percent. Housing prices are still falling, and credit markets are tight.

Johnson says after the government stimulus works its way through the economy, he’s not sure where new economic growth will come from.

JOHNSON: Where do we see expansion? And of course what’s driving that? Is it about investment? Is it about consumer spending?

The answers aren’t obvious. Peter Schiff at Euro Pacific Capital says policy makers in Washington are hoping consumer spending drives a recovery.

PETER SCHIFF: What they are trying to do is encourage Americans to do exactly what they did that helped create the problem. They want Americans going out to buy more things they can’t afford.

But Schiff believes a recovery like that won’t last.

In Washington, I’m Steve Henn for Marketplace.

Ryssdal: Tune in Friday to find out exactly how consumer spending’s going to shape up over the next month or so. We’ll get the April unemployment report Friday morning.

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