Economy: Recession, or not?

Constantly, the news is plagued by the now redundant claims of a recession. CNN, NBC, and Fox economists have repeated the same song and dance: we're not in a recession yet, but mark my words, it's coming. Or is it? Treasury Secretary Henry Paulson, left, and Federal Reserve Chairmen Ben Bernanke, right, predict otherwise.
The two devoutly stated following the economic readings that have Wall Street in fear of a recession that while the economy was trouble, there was and is no danger of a recession. Both used the recent interest cuts by the and the economic stimulus order signed by President Bush for $170 billion dollars inserted into the economy. However, dark clouds still loom on the horizon.

As said by Bernanke: "More expensive and less available credit seems likely to continue to be a source of restraint on economic growth." Because of good capital bot the Secretary and the Chairman doubt a downturn of any kind. Rather both, both expect that it is merely a dip before a hill. The Council of Economic Advisors predicted a total of 2.7% growth by the end of the year, although the current forecast by the Fed is a considerably lower 1.8%. Bernanke stated that an updated forecast is soon to come. And with the two interest cuts by the Fed, totaling 1.25%, many have begun to support the two. The following is an excerpt from the article at CNN.com in which Paulson pleads his cause to the Senate.

"Sen. Robert Menendez, D-N.J., pointed out that Goldman Sachs is one of the growing number of investment banks forecasting a recession this year and suggested that Paulson and Bernanke "hit the snooze button" when alarm bells about the economy first went off last year.

Menendez said he wasn't trying to talk down the economy, but that he was looking for "honest assessments" from Paulson.

Paulson bristled at the comments, telling Menendez, "If you're trying to talk the economy up, I'd hate to see you talk it down."

Menendez shot back, "I'm just trying not to hide my head in the sand."

"I'm not either," responded the Treasury Secretary.

The two also were asked to explain why investments in many major banks and Wall Street firms by sovereign wealth funds should not be a concern.

Sovereign wealth funds - large pools of money controlled by foreign countries - have taken stakes in recent months in Citigroup (C, Fortune 500), Merrill Lynch (MER, Fortune 500) and Morgan Stanley (MS, Fortune 500).

Paulson said these investments are an important endorsement of the U.S. financial system and that they do not pose a risk of foreign governments having undue influence on major banks here.

"I think we need to be vigilant. I don't think we need to be fearful," said Paulson." (CNN.com).

In the above passage, Paulson defends the investment of foreign companies into American banks, saying that any such stimulus can only be beneficial to the economy, rather than spark a doomsday recession prophecy.

Paulson and Bernanke's overall point is that the current slide in the economy will be inevitably followed by a "slow growth." Confident of the recent stimulus plan, the two repeatedly state their lack of fear in regard to a recession. Below is a link to a CNN clip involving the current state of the Wall Street Exchange as well as commentary of Bernanke's and Paulson's meeting with the Senate Banking Committee.

CNN News clip.

The full article detailing Henry Paulson and Ben Bernanke's economic crusade can be viewed here.

- Brady Ayres. (Grade this post, please.)