Bernanke’s Magic Eight Ball broke in early 2006

Posted on January 13, 2012 by

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This quote from Fed Chairman Ben Bernanke might be right up there with, “This ship is unsinkable.”

On the other hand, in Oregon, the state economist laid out some optimistic and pessimistic scenarios.  Here’s the pessimistic scenario (which, to be fair to Bernanke, the Oregon state economist did not think would be the most likely outcome):

At the same time, the housing market experiences a more severe correction with prices falling more than 20 percent by early 2007 and larger drops in housing starts and related residential consumption (construction, building materials, home furnishings, etc.). With foreign demand weaker, exports are also softer. Businesses react by slowing investments and consumers pull back spending. Both profits and the stock market soften in 2005 and further in 2006. Oregon businesses follow suit and slow down hiring to reflect the slower economic activity. The scenario does not result in a recession.

Two out of three ain’t bad.

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