How to translate Fedspeak

If Ben Bernanke told the plain truth, Wall Street would need a defibrillator. So the man talks softly...

By Andrew Leonard

Published April 3, 2008 3:33PM (EDT)

Here's how the Wall Street Journal interpreted Ben Bernanke's report to Congress on the state of the economy yesterday:

On Wednesday, Federal Reserve Chairman Ben Bernanke gave his most pessimistic assessment to date of the U.S. economy's outlook, strongly suggesting that a recession is likely.

Here's how Bloomberg columnist John Berry interpreted it:

The odds are at least 50-50 that the current period of economic weakness won't be labeled as even a mild recession.

Federal Reserve Chairman said as much yesterday in testimony before Congress's Joint Economic Committee.... His careful wording suggests he and other Fed officials think weak positive growth is a bit more likely than a slight contraction and clearly indicates they don't see a deep slump.

Who to trust? The incurably optimistic Berry, or those well-known doom-and-gloomers, the Wall Street Journal?

Here's a hint: Judging by Bernanke's track record, taking his assessments at face value is unwise. In his public statements, he has consistently underestimated the threat to the economy posed by the housing crisis. This is partially understandable -- if the Fed Chair told Congress that the economy was going down the tubes, Wall Street would have an immediate heart attack. But the result is that all his "careful" words have to be filtered appropriately. So when he finally so much as acknowledges that a recession is possible, his warning is worth taking seriously.

But not for Berry: "The severe recession some have predicted is still nowhere in sight."

I'm sure that will come as a reassurance to the 90,288 Americans who filed for bankruptcy in March, or the 407,000 who filed for unemployment compensation last week. The rate of 4000 bankruptcies per business day is the highest since the passage of the 2005 bankruptcy law, which made it significantly harder for Americans to declare bankruptcy. And the jobless claim number is the highest in two-and-a-half years.

Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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Ben Bernanke Globalization Great Recession How The World Works U.s. Economy