Bernanke endorses quick, temporary fiscal stimulus- Fed chief not predicting recession, ......

MarketWatch ^ | Jan. 17, 2008 11:54 a.m. EST | Rex Nutting, MarketWatch

[Ernest_at_the_Beach]

WASHINGTON (MarketWatch) -- Congress could help steer the economy away from recession if it adopted a quick, efficient and temporary fiscal stimulus plan, Federal Reserve Chairman Ben Bernanke told Congress on Thursday.

Bernanke made it clear he wasn't forecasting a recession, but said action by Congress, along with more interest-rate cuts from the Fed, could help prevent one.

"Fiscal action could be helpful in principle, as fiscal and monetary stimulus together may provide broader support for the economy than monetary policies alone," he said in prepared testimony to the House Budget Committee. Quick action would be necessary.

"You know central bankers are concerned about the economy when they condone stimulative fiscal policy," wrote Michael Gregory, an economist for BMO Capital Markets.

"To be useful, a fiscal stimulus package should be implemented quickly and structured so that its effects on aggregate spending are felt as much as possible within the next 12 months or so," Bernanke said. "Any fiscal package should be efficient... Finally, any program should be explicitly temporary."

In a speech that closely resembled one he gave last week that suggested the Fed stood ready to continue to cut rates aggressively, the Fed chairman advised Congress to think carefully before cutting taxes or boosting spending to stimulate economic growth.

As Bernanke spoke, the White House also endorsed some extra stimulus to help the economy, but gave no details about its plans or the timing of its announcement. President Bush is expected to offer specific proposals for a stimulus at his annual State of the Union address on January 28.

[Ernest_at_the_Beach]

All the major actors now agree on the need for something to be done, but there is no agreement, even in principle, on what the details would be.

Fed chief appears to side with Democratic proposals

[Ernest_at_the_Beach]

Audio from Marketwatch:

Laz & Noble go Off the News, a MarketWatch audio roundup

*****************************Intro*************************

MarketWatch news editors Anthony Lazarus and Chris Noble don't even raise an eyebrow at Merrill Lynch's billions in write-downs, but enter a broad discussion into the economic impacts of Ben Bernanke's proposed stimulus in a political year.

[WakeUpAndVote]

Fed chief appears to side with Democratic proposals

___________

I.E. Do whatever it takes to destroy the US encomomy in time for the elections?

[Ernest_at_the_Beach]

U.S. stocks turn negative as Fed chairman speaks
Fed bank: Manufacturing in Philadelphia region contracted sharply in January

*********************EXCERPT*************************

NEW YORK (MarketWatch) -- U.S. stocks on Thursday sold off for a third day straight, propelling the Dow to near 10-month lows, as Federal Reserve Chairman Ben Bernanke spoke about the country's economic trouble and a regional measure of economic activity contracted.

'When reminded about how bad things are, the market remembers it should go down.'

— Art Hogan, Jefferies & Co.

"When reminded about how bad things are, the market remembers it should go down," said Art Hogan, chief market strategist at Jefferies & Co.

"And, it is going to take more than just monetary policy to clean up the mess we've made with this economy," Hogan said.

"The Philadelphia Fed Survey was a disaster, defying even the most pessimistic projections," said Frederic Ruffy, an analyst at Optionetics.

Up about 50 points after the start, and then down more than 100 points in early morning trade, the Dow Jones Industrial Average by late afternoon had shed 214.2 points to 12,252., with 23 of its 30 components trading lower.

In the 12 trading sessions since the year began, the blue-chip index has declined about 1,000 points, or 7.5%.

[Ernest_at_the_Beach]

The Economy is shaping up to be the number one issue in November.....

[Ernest_at_the_Beach]

The Dems want to hand out money....

[RogerWilko]

I don't think the people on Wall Street liked what he had to say. It looks like we might hopefully be in the "throw in the towel" phase of this correction! We're getting slaughtered again right now.

Most of the damn indexes are 15-20% off their highs. The last year-plus of gains have been erased!

Man, if we end up stuck in a bear market, I'm gonna be PISSED! All the insiders and most reliable newsletters will have been WRONG!

[in hoc signo vinces]

The best thing the Fed Chair could have done is said that there were no perceived weaknesses in the economy and talk of recession is a media contrived stunt to play down the economy to get a Dumbocrat elected POTUS...and nothing needs to be done...

[ex-snook]

Economic problem isn’t interest and isn’t taxes.

It’s trade deals exporting jobs, factories, companies, dollars and Treasuries. The Washington money printing press will only increase the sale of wheelbarrows.

[Paine in the Neck]

The Dems want to hand out your money....

Fixed it.

[brownsfan]

“Man, if we end up stuck in a bear market, I’m gonna be PISSED! All the insiders and most reliable newsletters will have been WRONG!”

I am not real knowledgable, so I’m wondering if it’s time to run to higher ground? Should I move to bonds and guaranteed interest funds, or ride it to the bottom and hope I don’t get killed?

[GeorgiaDawg]

...it’s quickly becoming that with me.

[RightWhale]

The problem is oil beginning to end. The USA lost control of oil about 1970.

[Moonman62]

All the major actors now agree on the need for something to be done, but there is no agreement, even in principle, on what the details would be.

All major actors (especially the Fed) are responsible for screwing up our economy. Now they'll all slap each other on the back for coming to the rescue (using our money).

[brownsfan]

“...it’s quickly becoming that with me.”

Clearly you aren’t the target of the DBM, but the DBM does want the economy as the #1 issue. Everyone, even the Dems know that they are lousy on defense. If people feel we are at risk, the Dems are in deep do-do. But, if the economy becomes the focus, the Dems will spin away. As in: Remember the Clinton days? Lots of jobs, lots of money, lots of prosperity? Well, elect a Clinton again. *barf*

That is what we’ll see, and Joe sixpack will eat that up like it’s candy.

[misterrob]

We have not begun to see earnings reports come in that reflect business reality. I see a Dow back in the mid-high 10,000s by summer. Gas prices are likely going to be in the middle to higher $3 range.

I am 100% in cash and while inflation is eating away at my position I am not down 15%-20% either. However, real estate has been beaten up pretty good as has the financial sector. I think that in 6 months those will be good sectors to get back into even if it means a 6 month buying period til year end.

[RogerWilko]

I always feel like getting out, but I KNOW the second I get out, it'll probably turn around and I'll get burned. I rode it out last time (2000) and I wanted to get out before the next major correction.

What really ticks me off was I was just about to move a lot of mutual funds into safer areas. I was waiting for Jan so I won't incur a bunch of tax liabilities and also figured Jan would probably be a decent month.

What a bunch of CRAP! Now I'm gonna have to wait it out for who knows how long. At this point, I will be surprised if we get back where we were by the end of the year. It's all a crapshoot right now... Will we go lower or are we going to turn around? I sure as hell don't know! I think all this doom and gloom is a tad overblown, but now we're getting a snowball effect!

[Kolokotronis]

“Economic problem isn’t interest and isn’t taxes.

It’s trade deals exporting jobs, factories, companies, dollars and Treasuries. The Washington money printing press will only increase the sale of wheelbarrows.”

Exactly and precisely. The powers that be have been running a liquidation sale of this country’s assets for sometime and getting very, very rich in the process.

I wonder if we aren’t much closer to a social meltdown of sorts over all of this than most of us here on FR care to realize or admit.

[montag813]

Easiest daytrading environment ever. Just short. Every day.

[montag813]

The Dems want to hand out money....

So does Bush. Let's see...Screwing Israel on behalf of Arabs; caving in to Democrat economics...just like his dear old Dad!