Bernanke’s Illusional Growth

Bernanke’s Illusional Growth

Fed Chairman Ben Bernanke shared his growth forecast for the U.S. Economy at an event held by the Federal Deposit Insurance Corporation, as reported by Yahoo Finance.

“We see the economy strengthening. It has looked better in the last few months. We think a 3 to 4 percent-type growth number for 2011 seems reasonable.”

This is an improvement from the expected growth of 3 to 3.6% that Federal Policymaker expected just a couple months ago. WTF Finance questions the nature of that growth, given that this economic rebound and growth was solely brought to the Economy of the United States by means of credit expansion and increased debt. Even Bernanke admits that the unemployment outlook won’t improve anytime soon.

“Now that’s not going to reduce unemployment at the pace we’d like to, but certainly it would be good to see the economy growing and that means more sales, more business.”

WTF Finance reported in our recent articles “The Myth of Credit Scores” and “The Non-Foreclosure Crisis” how anti-free market interventionist policies by both Government and the Central bank are responsible for the perceived improved state of the US Economy. From a fundamental point of view little has changed for the US Economy and it is in as critical condition as post-subprime collapse and the low of the US Stock market in Spring of 2009.

Attempting to solve a credit and spending crisis through denial and policies that throw more credit and spending at the very problem is not conducive to a true recovery. Not only does it solely mask the symptoms but it perpetuates the problem by allowing the credit bubble to re-inflate and grow bigger in size.

The policies of Fed Chairman Ben Bernanke encourage more spending and increased leverage which results in the misplaced confidence in the US economy. Those were the same Central Banking policies that were are the root of creating this credit bubble. In the short term there is no doubt that the misplaced confidence in combination with the bailout programs boost spending, increase the GDP, and give the illusion of an economic recovery.

“We cannot solve our problems with the same thinking we used when we created them” – Albert Einstein

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This post was written by:

Jesse Livermore - who has written 99 posts on WTF Finance.


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