'Glimmers of hope' for US economy

Obama, Bernanke express cautious optimism while indicating 'more pain' ahead

WASHINGTON: - The worst may be over for the US economy, signalled President Barack Obama and Federal Reserve chairman Ben Bernanke yesterday in some of their most hopeful comments yet.

In separate speeches, they said the various policies taken to address the problems in the economy, be it the credit freeze or home foreclosures, were showing progress.

The sharp decline in economic activity in sectors like home sales and construction was also slowing.

'A levelling out of economic activity is the first step towards recovery,' Mr Bernanke said in a speech at Morehouse College in Atlanta, Georgia.

Added Mr Obama in a speech at Georgetown University in Washington: 'From where we stand, for the very first time, we are beginning to see glimmers of hope.'

But they also tempered their optimism by pointing out that the US economy was not out of the woods just yet, and that there would be 'more pain' before the crisis ended.

'2009 will continue to be a difficult year for America's economy,' Mr Obama cautioned.

'The severity of this recession will cause more job losses, more foreclosures and more pain before it ends.'

Economists are at odds over whether the United States has indeed turned a corner, or if the current situation represented a lull before the economic decline struck even harder.

While much has been made of the so-called 'green shoots' of economy recovery and the recent stock market rally, major indicators remained grim.

Unemployment in the US, for instance, was at a 25-year high of 8.5 per cent last month, while retail sales unexpectedly fell 1.1 per cent.

It also remained unclear how effective some of the administration's key policies will be in the coming months, particularly the critical attempt to rid US banks and financial institutions of their toxic assets and put them on a surer footing.

'We will not have a sustainable recovery without stabilisation of our financial system and credit markets,' said Mr Bernanke.

Despite these uncertainties, observers said Mr Obama was making the right political move by keeping ordinary Americans constantly updated on the economy, and reminding them of the broader goal his administration was pursuing - to build a new economic foundation for the country.
'We cannot rebuild this economy on the same pile of sand. We must build our house upon a rock,' said Mr Obama in one of his most extensive speeches on the economy.

He added: 'We must lay a new foundation for growth and prosperity, a foundation that will move us from an era of borrow and spend to one where we save and invest, where we consume less at home and send more exports abroad.'

The President argued that 'another American century' was within the country's grasp if it pushed through with much-needed reforms in financial regulation, education, health care and energy.

The Obama administration is trying to push through an ambitious US$3.6 trillion (S$5.45 trillion) Budget that will start addressing these long-term challenges, though it has run into stiff resistance from the opposition Republican Party.

Taking aim at his critics, Mr Obama said the crisis that the country was facing was not just due to economic problems, but also 'a fundamental weakness in our political system'.

'For too long, too many in Washington put off hard decisions for some other time on some other day,' he added.

'There's been a tendency to score political points instead of rolling up sleeves to solve real problems.

'This can't be one of those times.'

Source: Straits Times, 15 April 2009