Bernanke the Whiner....

Here is a link to the testimony.

Here is a great overview of how we got here.

The U.S. economy and financial system have confronted some significant challenges thus far in 2008. The contraction in housing activity that began in 2006 and the associated deterioration in mortgage markets that became evident last year have led to sizable losses at financial institutions and a sharp tightening in overall credit conditions. The effects of the housing contraction and of the financial headwinds on spending and economic activity have been compounded by rapid increases in the prices of energy and other commodities, which have sapped household purchasing power even as they have boosted inflation. Against this backdrop, economic activity has advanced at a sluggish pace during the first half of this year, while inflation has remained elevated.

Let's take this one at a time.

The contraction in housing activity that began in 2006 and the associated deterioration in mortgage markets that became evident last year have led to sizable losses at financial institutions and a sharp tightening in overall credit conditions.

Translation: as housing fell apart, so did anything associated with housing. This means mortgage debt is in serious trouble. According to a blurb I recently saw on Bloomberg, worldwide writedowns are now over $400 billion. Here's a scary point -- Asia has reported very little in writedowns. Either they were really smart, or we have some problems coming down the pike.

The credit markets are still not in good shape. Here is the Tedd Spread from the Fed:



Short version -- short-term debt is really expensive. This indicates people are hoarding cash and not lending.

The effects of the housing contraction and of the financial headwinds on spending and economic activity have been compounded by rapid increases in the prices of energy and other commodities...

...which have sapped household purchasing power even as they have boosted inflation

Retail sales are not adjusted for inflation.

These are not pretty pictures.

He forgot to mention poor job growth, or the the fact that real household income is down for this expansion. Bottom line -- we're got serious problems.