Mish reminds us that In his public meetings to defend his actions in late July, Ben Bernanke said:

“It takes GDP growth of about 2.5 percent to keep the jobless rate constant. But the Fed expects growth of only about 1 percent in the last six months of the year. So that’s not enough to bring down the unemployment rate.”

As Mish also points out, if we don’t get 2.5%, then unemployment will not only NOT come down…it WILL CONTINUE TO RISE.

Pray tell what happens if GDP can’t exceed 2.5% for a couple of years? What about a decade (or on and off for a decade)?  If you have come to the conclusion that we are going to have structurally high unemployment for a decade, you have come to the right conclusion. Ask yourself: Is that what the stock market is priced for?

The Federal Reserve itself has said that they expect unemployment to remain high for as long as 10 years.  Those unemployed consumers aren’t gonna be able to increase their consumption.  It will have to be the bank employees who get all the bonuses who lead us out of recession.  Are there enough of them?

Who wudda thunk it? Mish appears to have joined Dennis “The Recession is Over” Kneale.  Mish declares the “bottom is in” for GDP although hedging, calling it a “recoveryless” recovery and suggesting the possibility of a double dip later.  As more and more people throw in the towel and “buy in” to the recession is over mantra, the top of the bear market rally should appear.