This is awful. I get the whole “paint a rosy picture to restore confidence” thing and to avoid panic, but this is just wrong. Every potential “hope” for a recovery is conditioned with a factual reason that may not come to pass. If the good signs are based on hope the the downside risk fact, why are we supposed to be so optimistic? I get optimism, I am an eternal optimist but when it comes to this stuff you cannot ignore reality…
Here is the section to play close attention to:
We continue to expect economic activity to bottom out, then to turn up later this year. Key elements of this forecast are our assessments that the housing market is beginning to stabilize and that the sharp inventory liquidation that has been in progress will slow over the next few quarters. Final demand should also be supported by fiscal and monetary stimulus. An important caveat is that our forecast assumes continuing gradual repair of the financial system; a relapse in financial conditions would be a significant drag on economic activity and could cause the incipient recovery to stall. I will provide a brief update on financial markets in a moment.
Now, if we know 10 of 19 banks failed the stress test, CRE loans are about to cause another desecration of earnings and huge losses and all banks have admitted that consumers loans are expected to “significantly worsen” over the coming months, then, how do we NOT think the financial system is anything but far from repair?
Full text of remarks:
Ben Bernanke 4/5/2009
Disclosure (“none” means no position):