Or, to put it less succinctly, "The risks continue skewed toward the economy's remaining on a path inconsistent with satisfactory economic performance."
Which means this downturn/pre-recession ain't over yet, which means that Alan Greenspan will be cutting interest rates again, real soon. Probably before the March 20 Fed meeting, and probably by a quarter or half a percent, but that's still the part we guess about.
But he'll be doing something, and not just for businesses, which Greenspan indicated are busy healing themselves for summer. What really worries Father Greenback in times like these is the fragile courage of the American shopper, and you can tell he cares because he practically waxed lyrical.
"It is difficult for economic policy to deal with the abruptness of a break in confidence. In earlier testimony, I likened this process to water backing up against a dam that is finally breached. The torrent carries with it most remnants of certainty and euphoria that built up in earlier periods.
"This unpredictable rending of confidence is one reason that recessions are so difficult to forecast. For this reason, changes in consumer confidence will require close scrutiny in the period ahead, especially after the steep falloff of recent months."
Then again, that rending is "a process driven in large part by nonrational behavior." In other words, there's no reason to panic just yet, not least because nobody seems to be panicking just yet. "The weakness in sales of motor vehicles and homes has been modest, suggesting that consumers have retained enough confidence to make longer-term commitments, and, as I pointed out earlier, expected earnings growth over the longer run continues to be elevated."
Yet in testimony that saw Greenspan return repeatedly to a favorite topic the "wealth effect" of the stock markets on the public psyche the implication was clear: Greenspan intends to see the Dow and the NASDAQ show consumers the way back to the sunny side of the street. And he'll cut interest rates to help bridge the gap between the doldrums of now and the summer days ahead, when those companies finally cost-cut their way back to profitability. At that point, the cycle can begin again.
Barney doesn't say 'I love you'
Greenspan spent the rest of the morning dodging questions from House members on the Bush tax cut, and at one point had to sit still while Barney Frank demanded an explanation of why Greenspan had "intensified" the current slowdown with that half-percent hike in May 2000. (Greenspan launched into an answer, but Frank had already used up most of the five-minute limit, drunk on his own chutzpah. Greenspan offered to discuss it with him later.)
Greenspan's Wednesday testimony was a close cousin of his Senate testimony two weeks ago (the Fed itself labeled it an "update"). And not much has changed. Politicians still say stupid things in the Fed chairman's presence. The Fed is still optimistic about the economy's long-term prospects, and not much worried about inflation. And the short-term danger is still that people get so worked up about their fading 401k's and rising heating bills ("the rise in the cost of energy has drained business and household purchasing power," he said) that they turn Japanese and bury their money in the backyard.
And that tax-cut argument about the dangers of paying off the debt too soon and running scary $500 billion budget surpluses in 2005 and 2006 still sounds a little fishy when you're talking about Washington politicians. But Bush has given his big sales speech, and hit the road on his five-state tour, and though the Democrats persisted on Wednesday in patting down Greenspan for soundbites, the $1.6 trillion baby is out of the Fed chairman's hands now.
The economy, however, still needs him a little while longer.