Bernanke's Barb

Hearing Federal Reserve Chairman Ben Bernanke's recent statement that the U.S. recession was “very likely over,” the 15 million people who are without jobs, the 10 million who are 'underemployed' and the 40 million odd people who are now living at poverty level in America, would have a raised a collective sigh of relief. Now, they can get on with their lives and go back to their consumption sprees. However, in my pedestrian mind, I fail to comprehend how people without jobs are going to spend money they don't have to raise the country out of its recession.

Bernanke can no doubt back up his statement with statistical data, like improved retail sales in September, that point to a receding recession. Incidentally, while on the topic of improved retail numbers in September, it needs to be pointed out that the figures are being compared to sales numbers of September 2008, a time when the economy took a dive and consumers began tightening their purse-strings. But all this statistical data  on the economy fails to factor in a key variable — human emotion. And, misjudging the effects of consumer sentiment on human behavior can lead to widely skewed economic picture with 'very likely' disastrous conclusions.

With more than sixty percent of United States GDP dependent on consumer consumption, it behooves any financial top-gun to make 'nearly over' statements about the economy without keying in the influence of human emotion on retail spending. Recession will only be 'nearly over' when the consumer believes it is so. But, since much of recession is a state of mind, anything that can make consumers believe that the worst is over could become a self-fulfilling prophecy and to that end Bernanke 'nearly over' statement makes sense.