Signs of the Times

From the New York Times:

Ben S. Bernanke, chairman of the Federal Reserve, told Congress today that the economy is going to get worse before it gets better, a message that got a chilly reception from both Wall Street and politicians.

On a day when stock prices swung wildly, the dollar hit another new low against the euro and further signs emerged that consumers are growing more cautious about spending, Mr. Bernanke warned that the economy is about to “slow noticeably” as the housing market continues to spiral downward and financial institutions tighten up on lending.

Now the funny part... count the number of times they say "recession":

Testifying before the Joint Economic Committee, the Fed chairman said that the two rate cuts in September and October “should” be enough to keep the economy from slipping into a recession. Without being specific, he reinforced statements by other Fed policymakers that the economy would have to show signs of stalling out entirely before they would reduce rates again.

Asked if he saw any risks of a recession, Mr. Bernanke demurred. “We have not calculated the probability of a recession,” he responded. “Our assessment is for slower growth, but positive.”

The Fed chairman’s stance was similar to that of Treasury Secretary Henry M. Paulson Jr. At a meeting today with editors and reporters of The New York Times, Mr. Paulson predicted that the crisis in the mortgage and credit markets would hurt growth but not lead to a recession.

For something that's not going to happen, there sure seems to be a lot of talk about recession. Unfortunately, not everyone agrees. In fact, some very smart people are saying we are already IN recession. One of them is Jim Rogers.In a recent Reuters article, he said:

"The US economy is undoubtedly in recession," Rogers told the Telegraph in Hong Kong in an article published on its Website.

"Many parts of industry are actually in a state worse than recession. If it were not for (Federal Reserve Chairman Ben) Bernanke putting huge amounts of money into the market, the stock market would probably be down much more than it is."

So don't believe the hype. Whether or not people want to acknowledge it, recession is a real possibility, if not a reality. That said, it's not necessarily a bad thing. It's natural for things to expand and contract. For actions to have equal and opposite reactions. And if recession means bringing things more in line with their real value... then bring it on. More on this later.