As you count down the minutes to Bernanke’s Jackson Hole speech (at 10:00 AM ET), Paul Krugman uses his latest op-ed to remind you that the Fed Chair is likely to engage in one major fib: that the economy is still recovering.
Sure he’ll probably hedge, and now the slowdowns we’ve seen of late, etc., but it really doesn’t matter what headline GDP says…
The important question is whether growth is fast enough to bring down sky-high unemployment. We need about 2.5 per cent growth just to keep unemployment from rising, and much faster growth to bring it significantly down. Yet growth is currently running somewhere between 1 and 2 per cent, with a good chance that it will slow even further in the months ahead. Will the economy actually enter a double dip, with G.D.P. shrinking? Who cares? If unemployment rises for the rest of this year, which seems likely, it won’t matter whether the G.D.P. numbers are slightly positive or slightly negative.
Meanwhile, we wonder if there’s anything Bernanke can say that will please anyone. Maybe a promise of mega-QE will accomplish something, but we think the only way people won’t be disappointed is if they’ve learned to temper their expectations, which is possible.
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