60 Minutes interviews Fed Chairman Ben Bernanke

Last week, 60 Minutes correspondent Scott Pelley went on a ride-along with the FDIC when taking over a bank outside of Chicago. This week, he interviews Federal Reserve Chairman Ben Bernanke and asks the question, "When does this end?" First, from CBSNews.com:

"Mr. Chairman, I'm gonna start with a question that everyone wants me to ask: when does this end?" 60 Minutes correspondent Scott Pelley asked Bernanke.

"It depends a lot on the financial system," he replied. "The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis. We've seen some progress in the financial markets, absolutely. But until we get that stabilized and working normally, we're not gonna see recovery. But we do have a plan. We're working on it. And I do think that we will get it stabilized, and we'll see the recession coming to an end probably this year. We'll see recovery beginning next year. And it will pick up steam over time."

Asked if he thinks the recession is going to end this year, Bernanke said, "In the sense that this decline will begin to moderate and we'll begin to see leveling off. We won't be back to full employment. But we will see, I hope, the end of these declines that have been so strong in a last couple of quarters."

"But you wouldn't say at this point that we're out of the woods?" Pelley asked.

"No," Bernanke replied. "I think the key issue is the banking system and the financial system."

"Unemployment, as we sit here, is about 8.1 percent. I wonder, do you expect double digit unemployment?" Pelley asked.

"Well, it's hard to forecast exactly where we're going. Unemployment is rising. Job losses are still very severe. And no doubt, the unemployment rate's gonna go higher than it is. But I think, again, that if we do succeed in stabilizing the financial system, that we'll begin to see a slower pace of decline, and eventually, a stabilization that will set the basis for a recovery," Bernanke said.

"You seem to be saying that we're not heading into a new American Depression?" Pelley asked.

"I think we've averted that risk. I think we've gotten past that and now the problem is to get the thing working properly again," the chairman said.

The video is in two parts. First, part one:



Next, part two:

NIMBYs and seniors manage best through recession

Want to know the demographic magic bullets to survive recessions? According to a story in the Economist, areas with a larger share of seniors and NIMBYs -- such as California's Central Coast (i.e., Santa Barbara), its coast north of the Bay Area and some inland counties -- ride out economic troughs better than areas with younger populations:

Nowhere in California is immune to recession, but the oldest areas are proving most resistant. Of the ten counties with the lowest unemployment rates, nine, including Santa Barbara, contain an above-average proportion of people aged 65 or older. Youthful Los Angeles has shed almost a quarter-of-a-million jobs in the past year. Slightly older San Diego has lost a few thousand, while considerably older San Francisco has lost none. A map of the state’s retirees (see above) could almost double as a map of economic resilience...

California’s youngest regions are in its hot interior. In the middle years of this decade hundreds of thousands of families moved there in search of big, affordable houses. Unfortunately, many took on big, unaffordable mortgages to do it...

Health care is the only private-sector industry in California that accounted for job growth in 2008. Here, too, places benefit from having a fairly old population. The median age of people admitted to Santa Barbara’s Cottage Hospital is 55—eight years older than UCLA Hospital in Los Angeles. Although hospitals complain it is too stingy, few sources of revenue are more stable than Medicare, which paid for 44% of Santa Barbara’s patients in 2008.

In the past ten years, obedient to the findings of urban sociologists, American cities have tripped over themselves vying for young, creative people. They have revitalised downtowns and sponsored gay-pride parades. They might have been better off building retirement homes.

"Dr. Doom" Roubini peers ahead

With an opinion piece published in the Toronto Globe & Mail entitled "Yes, Chicken Little, the sky is really falling," Dr. Noriel Roubini has some advice for a global financial system in crisis, and warns of what might happen if the right solutions are not applied (hat tip: Patrick.net):

The rich world's financial system is headed toward meltdown. Stock markets have been falling most days, money markets and credit markets have shut down as their interest-rate spreads skyrocket, and it is still too early to tell whether the raft of measures adopted by the U.S. and Europe will stem the bleeding on a sustained basis...

The delusion that economic contraction in the U.S. and other advanced economies would be short and shallow – a V-shaped, six-month recession – has been replaced by certainty that this will be a long and protracted U-shaped recession, possibly lasting at least two years in the U.S. and close to two years in most of the rest of the world. And given the rising risk of a global systemic financial meltdown, the prospect of a decade-long L-shaped recession – such as the one experienced by Japan after the collapse of its real-estate and equity bubble – cannot be ruled out...

As we have seen in recent days, it will take a big change in economic policy and very radical, co-ordinated action among all economies to avoid disaster. This includes:

Another rapid round of interest-rate cuts of at least 150 basis points on average globally;
A temporary blanket guarantee of all deposits while insolvent financial institutions that must be shut are distinguished from distressed but solvent institutions that must be partially nationalized and given injections of public capital;
A rapid reduction of insolvent households' debt burden, preceded by a temporary freeze on all foreclosures;
Massive and unlimited provision of liquidity to solvent financial institutions;
Public provision of credit to the solvent parts of the corporate sector in order to avoid a short-term debt refinancing crisis for solvent but illiquid corporations and small businesses;
A massive direct government fiscal stimulus that includes public works, infrastructure spending, unemployment benefits, tax rebates to lower-income households, and provision of grants to cash- strapped local governments;
An agreement between creditor countries running current-account surpluses and debtor countries running current-account deficits to maintain an orderly financing of deficits and a recycling of creditors' surpluses to avoid disorderly adjustment of such imbalances.

Anything short of these co-ordinated actions may lead to a market crash, a global financial meltdown and worldwide depression. The measures adopted by the U.S. and Europe are a start. Now they must finish the job.

Now you all go out and have a nice day, ya hear?

California: a bellwether for a national recession?

With its $1.8 trillion economy, California tends to act as a early precursor to national trends in economics. According to story in the Wall Street Journal, the fall-out from its own recession could portend things to come in other states as well:

It's all but certain the U.S. economy is in a recession, as falling home prices and Wall Street turmoil have put the brakes on consumer spending and stoked unemployment. But California got there first. Now, the state provides a template of how a broad U.S. downturn could look.

With its export businesses, manufacturing sector, professional services and big retail employers, California looks like many other U.S. states, only more so. California's $1.8 trillion economy -- twice the size of India's and accounting for about 15% of the U.S. gross domestic product -- is powerful enough to have ripple effects nationally...