Economic Update

ECONOMIC UPDATE….Retail sales were up a minuscule 0.1% in June. Yippee. But inflation is still a concern, so Bernanke says not to expect any help on his end:

In prepared testimony at the Senate Banking Committee, Mr. Bernanke avoided the word “recession” in characterizing the current economy, noting instead that consumer spending and exports were keeping growth “at a sluggish pace” while the housing sector “continues to weaken.”

….He said that while the risks to the overall economy were still “skewed to the downside,” inflation “seems likely to move temporarily higher in the near term.” The Fed, Mr. Bernanke said, needed to guard against higher prices spreading throughout the economy.

Meanwhile, credit crisis #4 is brewing on the horizon. Batten the hatches, folks.

UPDATE: That “credit crisis #4” comment was overly cryptic. Sorry. Paul Krugman briefly explains the “TED spread” here:

The TED spread is the difference between the interest rate banks charge each other on 3-month loans (3-month LIBOR) and the interest rate on 3-month U.S. Treasury bills. It’s a measure of financial jitters. If banks believe that their peers are solid, they should be willing to lend each other money on almost the same terms as money lent to Uncle Sam. When they start demanding a big interest rate premium, that’s a sign of fear.

The TED spread has spiked three times in the past year, indicating three separate credit crises (all of them related, obviously, but still separate). Today Krugman notes that the TED spread is again starting to spike in the wake of the IndyMac/Freddie/Fannie failures, which may mean that yet another credit crisis is brewing.