Full text of Bernanke speech far different from media summaries

Did the whole mainstream media lie about Bernanke’s speech, or were some only plagiarizing the others?

He was far more cautious than depicted.  He said that the Fed will step in as needed but he’s been saying that for a year now.

He doesn’t actually say that the QE created two million jobs.  He says that running certain models suggests that the outcome with those programs is two million jobs better than the alternative, but the results of that must be treated with caution.

He notes that there are only four years worth of empirical evidence as to the effects of this type of intervention.

He is very clear throughout that the bar is higher for non-traditional interventions.

Perhaps most importantly, he says that intervention would be in a context of price stability.

He seems to be alive to all the empirical uncertainties, limitations of computer models, potential for adverse effects, the difficulty in assessing counterfactuals, etc.

As far as I can see he nailed it.

He also pointed out that government’s role in dealing with financial issues is the critical thing to look at, with and his comments are clearly against severe austerity measures.

After reading the full text my impression is he’s the only one in the global financial mess that knows what he’s doing.

The lack of any objective analysis of the speech in the media is disturbing. 

He’s clearly loathe to have another round of QE but everybody is talking about it like it’s a done deal for September.

Maybe the conflict of interest that needs to be looked at the hardest is in the media. 

How many financial institutions own how many shares in media conglomerates?

False news reports were just used to shift global markets and send commodity prices rocketing up.  That kind of thing used to be illegal and maybe still is. 

The irony there is that the false news may make QE less likely.  

The last two words in that speech are “price stability”.

Bernanke is clear he doesn’t want to create bubbles or mass inflation.

Commodities are already in a bubble and were grossly inflated even at their 2012 lows.

So jacking up the markets in anticipation of QE makes QE look more hazardous.

The lack of any objective reporting by anyone of the most important economic speech of the year is truly disturbing.


Fed needs to be looked at for conflicts of interest

The Federal Reserve is run by people who have connections with banks and investment houses.

So what happens when those interests conflict with those of the general population?

Banks and investment firms will want QE3 because they can make money off it and provide society with nothing in return.

Bernanke says further QE will drive stocks and financial markets higher.

Stocks and financial markets are not the economy. 

If a company is objectively worth a billion dollars and already has a market capitalization of 5 billion dollars, what on earth do we accomplish by raising it’s market capitalization to 10 billion dollars?

What do consumers and retailers gain from increasing prices of food, gas and other commodities?

I see in an article on Jackson Hole that Bernanke has supposedly “refuted” the arguments against QE.

That QE makes commodity prices go up is notorious and irrefutable.  These markets are constantly reported to go up on anticipation of QE. What conceivable argument could Bernanke make that this does not happen? 

Or maybe, notwithstanding that it was increasing commodity prices precipitated the financial crisis, it is his position that increasing commodity prices so that consumers and retailers are poorer is good for the economy.

The markets are not the economy.  Remember when things happen that are bad for the economy, like layoffs, moving manufacturing offshore to cheaper sites, and drops in wages, the markets tend to go up.

Then there is the claim that QE created 2 million jobs.

It was recently revealed that jobs just rose to the same level as at the start of Obama’s presidency.

So when there is no net increase, what is the basis for coming up with 2 million jobs?  It’s like Bernanke is channelling Romney.

Moreover, QE2 by increasing commodity prices has probably slowed the recovery.  Extra money going to international energy and resource companies is money that isn’t spent locally.

Liquidity issues, if they arise, should be dealt with by way of adding the minimum liquidity required, and targeted, so as to deal with that problem but not create unnecessary inflation.

The point of adding liquidity is so that viable businesses don’t close their doors because of an artificial problem.

Buying up government bonds so that companies that already have liquidity will plant their money elsewhere does not accomplish that objective except perhaps indirectly and in the discretion of other institutions.

Fed members need to remember that when they make decisions they are only wearing one hat.

If they are getting confused about that, well, the basis for giving the Fed free reign is they are supposed to be a neutral independent body.