Goldman's Take On Bernanke's "NEW QE" Speech

Tyler Durden's picture

While it appears to us that Bernanke's message was loud and clear, there are those who need validation and peer-confirmation. Such as that from the firm whose alumni run the Fed, namely Goldman Sachs. Below is Jan Hatzius' take on the "surprising" Chairman speech which essentially said QE can and will come at any time there is a downtick in the market, masked by the unemployment rate rising to its fair value, as estimated by Gallup, somewhere around 9%.

From Goldman Sachs:

BOTTOM LINE: Fed Chairman Bernanke argued that the outperformance of labor market indicators recently may reflect a “catch-up” from unusual weakness in jobs during the recession. By implication, continued declines in unemployment will require faster GDP growth in the future. He also continued to argue that most of the increase in long-term unemployment is cyclical rather than structural in nature. Chairman Bernanke’s read on the state of the labor market was consistent with an accommodative stance for monetary policy—though he did not directly call for additional easing.


1.    Federal Reserve Chairman Ben Bernanke spoke on recent labor market developments before the annual meeting of the National Association for Business Economics (NABE) today. His comments focused on two aspects of the current debate on the labor market: (1) the outperformance of labor market data relative to GDP growth; and (2) how much of the increase in long-term unemployment reflects cyclical rather than structural factors.

2.    Chairman Bernanke discussed three alternative explanations for the better performance of labor market indicators recently. First, the surprisingly large drop in the unemployment rate may reflect statistical noise, and that GDP could be revised higher in the future. However, he said that there is no specific evidence to support this conclusion at this point, and in fact Gross Domestic Income (GDI)—an alternative measure of aggregate activity—was weaker than GDP over the last year. Second, the decline in the unemployment rate could be overstating the improvement in the labor market, as the drop partly reflects potential workers exiting the labor force. However, Chairman Bernanke argues that the decline in broader measures of labor underutilization (he cites the BLS’s U-5 measure) casts doubt on this explanation. Third, the large decline in the unemployment might reflect “a catch-up from outsized job losses during and just after the recession”. Chairman Bernanke ultimately finds this argument most compelling, and presents some simple supporting evidence.

3.    The chairman’s comments on the recent decline in the unemployment thus cut two ways. On the one hand, the drop in the unemployment rate is likely a real and encouraging development. On the other hand, because the outperformance compared to GDP likely reflects a catch-up from past weakness then, in Chairman Bernanke’s words, “further improvements in unemployment will likely require faster economic growth than we experienced during the past year”.

4.    The second portion of the Chairman’s speech focused on whether the increase in long-term unemployment reflected cyclical or structural factors. Consistent with his existing views, Chairman Bernanke argued that elevated structural unemployment is mostly a cyclical phenomenon, and that structural factors can explain only a small (and possibly temporary) part of the increase.

5.    On monetary policy, the Chairman said that faster growth—perhaps needed to see further declines in unemployment—“can be supported by continued accommodative policies”. He also argued that because the increase in long-term unemployment was primarily cyclical, “then accommodative policies to support the economic recovery will help address this problem as well”. These statements were not necessarily calls for additional easing, but they clearly supported the Fed’s current accommodative stance.

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GetZeeGold's picture is's so shiney you can hardly look at it.


GetZeeGold's picture



Be the first on the block to trade the old QE for the new QE.


bigdumbnugly's picture

yes!  now i feel like i've caught up with the joneses.

malikai's picture

Title should have read: "Goldman's prepared take on Bernanke's 'NEW QE' Speech".

battle axe's picture

Goldman Sachs, "we are the federal government".

The Big Ching-aso's picture



Must be time for more WS/IB bonuses. Without which the Hamptons would suffer an average person's existence.

Sudden Debt's picture

And just like the New New Ipad, they burn a hole in your lap and toast your balls!

strannick's picture

Goldman and QE, cause they have their fingers crossed behind their back

SWRichmond's picture

The new, new QE.

But hardly surprising.  The smackdown in precious metals was needed to allow the Benrnake the space to announce more QE, so as not to make the effect of it take off from an already-high price.

Once you've seen the playbook a few times, nothing surprises.  Strong hands.  Period.


OT: I posted an article in the forums; no feedback.  I don't know whether it's over people's heads or just poorly written.


xela2200's picture

Yes, it all felt like prep work.

Assetman's picture

The "new QE" is more likely going to be "more Operation Twist".

Bernanke is trying to use employment as distraction to justify accomodative policies that simply will not address the underlying issues of long-term unemployment.  Even Uncle Ben himself admitted that we are not likely to grow ourselves out of this problem-- though his prescriptions suggest totally the opposite.

Here's the reality: the Fed desperately needs to suppress the long end of the Treasury curve-- or the government's debt and interest burden becomes unmanagable.  An additional round of QE could be justified if deflation was abundant... but it isn't.  I think that the only thing that really matters to the Fed at this point is to prevent a possible government debt implosion. 

Why?  Because the Fed fully endorsed the concept of unprecented deficit spending (and the explosion of debt that went with it) in the first place.

So... it appears once O-Twist 1.0 winds down in June, we get (at least) O-Twist 2.0.

Interstingly, enough, the bond market calls BS on the whole thing and bids long-term Treasury yields higher.

This is going the get real interesting the next few months... 

BlackholeDivestment's picture

Chairsatan just loves to sacrifice babies beasts upon Moloch's flaming alter.

Cognitive Dissonance's picture

On monetary policy, the Chairman said that faster growth—perhaps needed to see further declines in unemployment—“can be supported by continued accommodative policies”.

Accommodate THIS Fed bitch.

FrozenOut's picture

I'll say it again, since nobody seems to remember.... Rational Expectations Theory! The public knows the difference between real growth and fake sugar high growth created by monetary policy and reacts differently to each scenario. 

SeverinSlade's picture

Can someone please send a memo out to the HFT algos that QE3 is coming, but ONLY after a significant downtick in the market (at LEAST 10-30 percent).

SheepDog-One's picture

Man the shit must REALLY be bad behind the curtain if they have to come out with daily QE rumors, and now 'Perma QE'? Just these anytime you see a slight downtick so now the markets are teflon coated bulletproof? 

xela2200's picture

And We haven't heard Iran news in a week neither.

mendigo's picture

Market is very anemic and needy.
They have to follow thier dual mandate of misleading the public while giving hand-jobs to bankers.

Another excellent Tylerism: "Ctrl-Preserve". Pretty well sums it. Thanks!

RagnarDanneskjold's picture

What will the Chinese villagers do? Demand more gold.

strannick's picture

And the Indians, and the Turks...

Sudden Debt's picture





unrulian's picture

I have on many occasions, accomodated your mom

Lost Wages's picture

"Those who wish to understand the Federal Reserve must first understand the Kabbalah." -Madonna

(fake Madonna quote)

Deep79's picture

ZH has been claiming since last June QE is coming

even a broken clock is right twice.


It aint coming unless SP breaks 1000



LawsofPhysics's picture

Hey idiot, ZIRP is QE!  Unless of course you really believe that there is no real cost for creating capital without adding any real value to the economy.

Deep79's picture

No need for names. I am stating my view. 

It amazes me this site, best financial site on web, but if someone dares to have a opposing view, they are vilified. We should be having open dialogues.


And no, ZIRP is not QE, get your facts straight






jcaz's picture

Your view isn't opposing, it's just wrong.

And if you cannot see ZIRP for what it is, perhaps this site is not for you-  Motley Fool sounds more your speed.....

Deep79's picture

For you to be 100% certain that my view is wrong, and to say it out loud, maybe you should be on Motley Fool

Anyone who says they are 100% certain, is a FOOL



malikai's picture

Uh, how do you reckin they acheive ZIRP?

CryingBear's picture

Watch it, someone got junked 27 times in a row for thinking Ron Paul might be wrong and I got junked 14 times a row for laughing at him getting junked 27 times.

brewing's picture

ok, it was coming no matter what but sp 1000 isn't going to happen.  it will only take a 6 to 8% correction for accomodation to commense...

Deep79's picture

thats seems to be the view here, I respectfully disagree. If anyone thinks the market will never go down agian, they are VERY VERY wrong.

The Market will eventually call the FED's bulff, you can manipulate over short term, but eventually market will do what has to be done.


brewing's picture

agree, the market will tank someday.  but, we're talking short term accomodation and it will happen with the correction i'm suggesting and the market will melt-up again...

SheepDog-One's picture

GREAT so now we just have totaly artificial markets supported by 'I'll flood in more fake money any time the market takes a little lurch down' and HELLO $120 new floor for oil!

AH its a new dawn in america, sure is!

Snakeeyes's picture

Tim prints, Ben buys. Train to hell!


Silveramada's picture

Hamlet dilemma was To Be or not to BE....BERNANKE has it easy: between printing or not printing the answer IS: PRINT MORE AND MORE PAPER TILL THE DOLLAR IS WORTH ZEROOOO!!!!!

LongSoupLine's picture



GS and the Fed can both rot in the molten masses of hell.  I f'ing hate them!

fredquimby's picture

4.    The second portion of the Chairman’s speech focused on whether the increase in long-term unemployment reflected cyclical or structural factors.

So this is the Chairman wondering whether companies are going to throw out the super efficient, 24hr working, no strikes, mistakes or vacation taking machines that they just installed to replace those silly and inefficient humans?

Good luck with that cycle Ben.


Firing Pin's picture

The fact that Ben is on a speaking tour to specifically bash gold is very telling in my opinion. It must be really bad behind the scenes...

Global Hunter's picture

absolutely 100%, they're scrambling to buy time until all the Fee Mah camps can be made fully operational.

khakuda's picture

Bernanke's speeches should just read something like this:

"The stock market went down a bit last last week.  This is deflation and this aggression will not stand.  It must go up every day and every week, or I will print more money and debase the currency even more to give the appearance that my policies are working.  Having destroyed the housing and bond markets in enormous bubbles, it's the stock markets turn to make everything appear great.  It's had it's 10 year rest and it's time."

devo's picture

Retail investor bait.

TradingJoe's picture

mui correcto Bubba! They desperately need to unload...! 1414 was last week's top, we're almost there...! Friday is window dressing...!

devo's picture


Anyone who believes the Fed can justify QE3 deserves the loss they're about to take.