Ben Bernanke, Chairman of the Federal Reserve, said yesterday that America’s recession “probably” will end this year if the government succeeds in bolstering the banking system. Bernanke also stated that “we’ve seen some progress in the financial markets, absolutely.” However, he warned that stabilizing these markets to the point that we can experience a true recover will not be easy.
Bernanke’s cautious optimism seems to correspond, to at least a limited extent, with the view of Wall Street, where markets have rallied significantly (today, though, they were essentially unchanged). How Main Street sees things is anyone’s guess, but my wife and daughter tell me that they see significantly more people shopping this month than they did last.
In any event, I think Bernanke at least has his eye on the economic ball. Getting out this recession within a reasonable time frame is not about passing stimulus plans; it’s about solving the financial crisis. The Obama administration, by contrast, has its eye on the political ball, as it tries to leverage the recession into a vehicle for expanding government.