Chairman Bernanke says no double dip recession. Sort of.
Federal Reserve Chairman Ben Bernanke said Monday he is hopeful the economy will gain traction and not fall back into a "double dip" recession.Broader financial contagion? IF? There is no IF about it. It is just a matter of when. And did the Chairman mention the China Real Estate Bubble? No he did not.
"My best guess is we will have a continued recovery, but it won't feel terrific," Bernanke said.
That's because economic growth won't be robust enough to quickly drive down the unemployment rate, now at 9.7 percent, he said in remarks to the Woodrow Wilson International Center for Scholars, a nonpartisan research group.
The economy grew at a 3 percent pace in the first quarter of this year. That's good growth during normal times. But coming out of such a deep recession, the economy must grow much more strongly to make a dent in the jobless rate.
Fears have grown that the recovery could be derailed if Europe's debt crisis turns into a broader financial contagion, crimping lending in the United States and around the globe.
And something else he didn't mention while we are at it. Housing may go into a double dip.
mortgage purchase applications are down nearly 40 percent from a month ago to their lowest level since April of 1997. Yes, you can argue that a larger-than normal share of buyers today are all cash, but those are largely investors.The mentality seems to be "If we just hold on there are better days around the corner." But what if that is not true?
That means real organic buyers are exiting in droves.
"With another week of historically low mortgage rates, the trend from the prior three weeks continued, as refinance applications increased while purchase applications dropped. Purchase applications are now almost 40 percent below their level four weeks ago, while the refinance share, at 74 percent, is at its highest level since December," said Michael Fratantoni, MBA's Vice President of Research and Economics.
And then the Realtors' chief economist, Lawrence Yun, after touting the numbers and telling all of us how much home equity was "preserved" by the tax credit stabilizing prices ($900 billion), throws water on his own numbers:
“A big concern surfacing recently is insufficient time to close the deal at the settlement table. Under normal circumstances, two months would be enough time from contract signing to settlement date,” Yun said.
“However, the recent housing cycle has brought long delays related to the short sales approval process by banks, and from ongoing appraisal issues. There could be a sizable number of homebuyers who responded to tax credit incentives, but may encounter problems meeting the settlement deadline by June 30.”
What if they are cooking the books?
The Bureau of Labor Statistics reported on Friday that employment in the United States grew by 433,000 jobs in May, but that those jobs included 411,000 temporary workers hired by the Census Bureau.So let me answer the question: what if better days are not around the corner? And the answer is: a second crash. A Double Dip Recession.
This book on the Great Depression was pretty popular for a while:
The Forgotten Man: A New History of the Great Depression
The reason I bring it up is that there were lots of dips (rises and falls) in that depression. Could we be repeating some of the same mistakes? Why not?
Cross Posted at Classical Values