Federal Reserve Assures Recession is not Imminent
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Fighting increasingly worrying data about the American economy, the Federal Reserve has made a plea to the world to remain calm. A historically unprecedented presentation by the last four Federal Reserve chairmen—Janet Yellen, Ben Bernanke, Alan Greenspan, and Paul Volcker—focused on how the economy remains on a “solid course,” despite increasing evidence that a recession might be looming.
The phrase comes from standing Chair Yellen, who added that the U.S. has made “tremendous progress” from the financial crisis of 2008.
Fighting increasingly worrying data about the American economy, the Federal Reserve has made a plea to the world to remain calm. A historically unprecedented presentation by the last four Federal Reserve chairmen—Janet Yellen, Ben Bernanke, Alan Greenspan, and Paul Volcker—focused on how the economy remains on a “solid course,” despite increasing evidence that a recession might be looming.
The phrase comes from standing Chair Yellen, who added that the U.S. has made “tremendous progress” from the financial crisis of 2008.
“The domestic U.S. economy is moving forward,” former Chairman Bernanke added, saying that a recession this year is no more likely to come than it was last year or the year before.
Greenspan concurred. “I doubt very much if a recession is what our problem is,” he added, instead pointing the finger of the average American worker as the source of whatever economic weakness the country is currently facing.
Arguing that slow productivity growth is the real problem in America’s economy, and not stagnant wages, falling corporate profitability, weak demand, growing income inequality, greater concentration of wealth, or political unrest, Greenspan urged policy makers to find a way to make workers more productive.
Looming Alarm
Meanwhile, the market is ringing more and more alarm bells that America is in trouble.
A recent research note by Nomura economist Bob Janjuah said that earnings are likely to be negative, stocks are in an equity bear market, and we are facing a systemic global slowdown that is only just beginning.
“My confidence on my negative views for global growth, on my belief in deflation over inflation and on the deeply negative outlook for earnings are now set even more in stone. The Fed has told me as much. In fact, I suspect that the Fed in private is far more concerned about these factors than it is currently willing to admit,” Janjuah said.
Janjuah’s view is shared by analysts at Goldman Sachs, Bank of America, and other firms, who all released notes largely dismissing the public display of the four Fed heads. “I also do not think that this current rally leg has much left in it—the power of Fedspeak without Fed action is already waning,” Janjuah said.
Similar reports from bond analysts also warn that lower business activity and declining revenues and earnings could cause distress in corporate bond markets, which could have a ripple effect through the economy.
As if to confirm the increasingly negative view of economists in the private sector, the Atlanta Federal Reserve’s data-driven GDP projection shows first quarter GDP growth falling to just 0.1%, another downward revision after falling from 1.4% to 0.7% and then to 0.4%. This is substantially lower than economists’ predictions of 1.9% GDP growth.
