An ancient fortune says: "May you live in interesting times." But Fed Chairman Ben Bernanke may have had all the interesting times he can stand. That's why his Aug. 26 speech in Jackson Hole, Wyo., was calculated to be uninteresting. And it seemed to work.
Bernanke said his long-term view was "more optimistic" and that "the growth fundamentals of the United States do not appear to have been permanently altered by the shocks of the past four years." Bernanke did not rule out future action by the Fed, but he said he would take no action now. His inaction seemed to satisfy conservatives who think the Fed has already done too much. His explanation was a sign of confidence in the economy to heal itself.
Bernanke's speech came after four straight weeks of losses on Wall Street, and some of the most volatile days in market history. One week saw four out of five days with 400-point swings, unprecedented in the 115-year history of the Dow.
The overall economy, meanwhile, is not out of the woods. JPMorgan Chase & Co. now predicts growth at an annual rate of just 1 percent, down from an earlier forecast of 2.5 percent. A survey of leading economists says high unemployment and weak consumer spending will hold back the U.S. economy into 2012. If they're right, these conditions may make for boring economic news and calmer markets, but hot political news as we approach an election year.
The crushing debt loads of Ireland, Greece, Spain, and Portugal have brought the EuroZone nations to the brink of economic meltdown, but don't tell that to Europe's largest corporations.
Commodities trader Glencore posted strong earnings for the first half of 2011. Drinks maker Diageo also announced upbeat figures. Credit Agricole, France's largest retail bank, is thriving in part because scared Europeans are practicing some old-fashioned thrift: Savings rates are up in most of Europe since 2005.
The problem-if you want to call it that-is that these earnings are the result of increased productivity. France's unemployment rate is nearly 10 percent. Germany is at 7 percent-good by the standards of its neighbors, but still well above full employment, and the rate seems to be stuck. Companies are reluctant to hire new workers until they know the economy is out of the woods, so it's a cycle that is likely to continue for a while.
Brazil, Russia, India, and China mostly sat out the Great Recession. Growth in the so-called BRIC countries continued while the United States and Europe strained under debt, housing crises, and bank meltdowns.
But these countries have huge problems. Brazil and India now face inflation. China's unwillingness to let its currency float on the world currency markets means that just about every aspect of its economy is artificial. It now has a housing bubble, its banks have massive bad debt problems, and it has an unsustainable trading volume with virtually every international trading partner, including the United States.
The bottom line: Strong growth had masked these problems, but all four countries now forecast much slower growth through at least 2012. So the BRIC countries may have survived the Great Recession, but they may become victims of a weak global recovery.