Bernanke and Fed say we’re up shit recession creek

The Federal Reserve, at its March 18 Open Markets Committee Meeting, without using the R word, said we’re in a recession. Here’s just a few highlights:

Similar stresses were again evident in the financial markets of major foreign economies. However, economic news in these economies was generally less downbeat than in the United States, leading to expectations of greater monetary easing in the United States than elsewhere. The trade-weighted foreign exchange value of the dollar against major currencies declined notably.

Remember when Europe, “Old Europe” of Don Rumsfeld longing, supposedly always came out worse in times of recession than us? Not this time.

In the forecast prepared for this meeting, the staff substantially revised down its projection for the pace of real GDP throughout 2008. Although the available data on spending and production early in the first quarter were not materially weaker than the staff's expectations, many other indicators of real activity were more negative.

Wait … wait … listen for it …

The staff projection showed a contraction of real GDP in the first half of 2008.

Boom, there it is; we’re in a recession.

Now, the Fed goes on to predict recovery in the second half of the year. Possible, but this would sound more believable if the FOMC didn’t claim that the “stimulus” tax rebates will be the engine of this. As Kevin Drum says, almost no serious economist buys this..

But, wait, it gets better, as The Worst Fed Head Since Greenspan™ really gets the Fed to live up to Bernanke’s moniker in its 2009 forecast:

The forecast showed real GDP rising at a rate somewhat above the growth rate of its potential in 2009, in response to the impetus from cumulative monetary policy easing, continued strength in net exports, a lessening drag from high oil prices, and a relaxation of financial market strains.

Do you really believe exports will continue to go up? That can only happen here in America if the dollar goes even further in the crapper, right? And, if the dollar goes further in the crapper, we’ve got the stereotypically dreaded stagflation.

And, do you really believe in a “lessening drag from high oil prices”? Not I. Three or four times, Bush has jawboned the Saudis about oil production. The times they have claimed they have more reserves, have they pumped them? It’s hugely dishonest for the Fed to not breathe a syllable about Peak Oil.

In fact, the Fed itself admits energy prices will stay up for ALL of 2008, thereby undercutting the claims that the recession will last just six months.

In addition, the forecast for headline PCE price inflation incorporated a much higher rate of increase for energy prices for the first half of the year; as a result, headline PCE price inflation was expected to substantially exceed core PCE price inflation in 2008.

And, do you really think financial markets will be that relaxed by 2009? The only slim chance of that is if Bernanke’s recession does actually have a rebound in the first half of 2009.

The minutes also don’t talk a word about even a bit of stagflation fears, despite worries about inflation being writ large all over the minutes.

Well, that’s not quite true. Richard W. Fisher and Charles Plosser voted against the 75 point cut in interest rates March 18 precisely because of inflation fears. Fisher, in fact, stressed international influences on U.S. interest rates, the very thing that the Fed minutes hint at above in saying that recessionary problems will be worse here in the U.S. than many other places.

But, Fisher and Plosser are being led by a clown who is himself a semi-willing puppet on the chain of Wall Street. So much for the “independence” of the Federal Reserve.

Anyway, the material quoted above is just from the first half of the minutes. Read through the whole thing.