By Irwin M. Stelzer at The Weekly Standard
"Bewitched, bothered and bewildered," warbled Ella Fitzgerald, among others. That old song, written in 1940 by Lorenz Hart and Richard Rogers, just about describes what is going on in the American economy. When seven of the seventeen officials of the Federal Reserve Board dissent from the chairman’s decision to keep the Fed’s $2.05 trillion pile of mortgages and U.S. Treasuries from shrinking, uncertainty takes on a new meaning. Ten want to set the stage for printing more money, seven think enough is enough.
Fed chairman Ben Bernanke used the platform of the gathering of central bankers in Jackson Hole yesterday to attempt to reassure markets by promising additional monetary stimulus if it is needed. But he also confessed that “fiscal stimulus … can drive recovery only temporarily” -- in the end, it is up to consumers and businesses to create demand for goods and services. Worse, he confessed that the Fed had misread the mortgage market and allowed developments “inconsistent” with the Fed’s intention to keep policy loose. Makes one wonder if the Fed really has a grip on things.
For investors, uncertainty is the way station to fear. If those Fed experts can’t agree, we can forgive investors for being so unsure of what is next in store for the economy that they flee from shares to the safety -- alleged safety, say some -- of U.S. treasuries, despite their extraordinarily low yields. Never mind that earnings have been surprisingly good. All it takes is some bad economic news, and investors put their cash where it yields almost no return at all -- but is “safe.”
And of bad news there is more than enough. The economy, it turns out, grew at an annual rate of only 1.6 percent in the second quarter, rather than 2.4 percent as originally estimated. That means that the growth rate in the most recent three quarters has dropped steadily, from 5.0 percent at the end of 2009 to 3.7 percent and 1.6 percent in the first two quarters of this year………
Meanwhile, the president and Congress initiate still more spending, despite a soaring deficit and the fact that the trillion-dollar stimulus seems not to have lowered the unemployment rate by very much, if at all. One can’t help but be reminded of the thought attributed to Albert Einstein: “Insanity is doing the same thing over and over again expecting different results.” Or, as Rogers and Hart put it, “Burned a lot … and now you’re broke … [and] bewitched, bothered and bewildered.”
Despite Vice-President Joe Biden's tireless speechifying to promote our country's glorious economic "Recovery Summer," new numbers indicate that the economy is actually going from bad to worse.
In fact, there's almost no indication that the huge stimulus package the Democrats pushed through had any positive impact at all, in part because job creation through taxation is an economic impossibility, as well as the fact that the taxpayer-funded stimulus programs were riddled with typical government fraud and ineptitude.
At this point, economic experts seem to be putting most of their efforts into semantics, trying to decide whether this is a "slow recovery," an "inverse recovery," a period of "negative growth," a "double dip recession," a "depression,"or simply an extended period of Hope and Change.