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Ben Bernanke’s big ‘if’
The Fed chief sees economic recovery next year, with some caveats
 

President Obama’s address to Congress could not have had a “better lead-in” than Wall Street’s 3 percent to 4 percent bounce on Tuesday, said Steve Schaefer in Forbes. The battered markets were “soothed” by Federal Reserve Chairman Ben Bernanke’s semiannual testimony before the Senate, in which he eased concerns that the U.S. would nationalize banks and said that the U.S. economy should “show signs of recovery in 2010, if the financial system is stabilized.”

The part about the recession ending late this year sounds pretty optimistic, said Andrew Leonard in Salon, but only if you ignore Bernanke’s “giant, honking, humongous, get-down-on-your-knees-and-pray-for-salvation ‘if.’” For any hope of a 2010 recovery, the government's intervention—including the Obama team’s nebulous bank rescue plan—needs to work.

“Well, I’m not hopeful” and, despite Tuesday's gains, “neither is the stock market,” said Felix Salmon in Portfolio. If anything, Bernanke sounds too optimistic. Like Obama, his assumptions seem based on “hope”—that banks can repay the government, that house prices will stop “plunging,” and that companies will start hiring again. In this “recession of unprecedented complexity and difficulty,” isn’t it better to assume the worst?

It’s better to make policy decisions based on evidence, not assumptions, be they optimistic or gloomy, said James Surowiecki in The New Yorker. Presumably, Bernanke has better data than bloggers do from which to “decipher the actual state of the U.S. economy.” If he thinks the U.S. has a "chance of growing at the end of 2009,” that doesn’t mean he’s "failing to confront reality.”

 

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