The punchline (as far as markets are concerned) of Bernanke's Q&A appears to be: Inflation and jobs signal more Fed stimulus needed and that Tapering does not end stimulus. In other words - highly accomodative policy needed for foreseeable future:
- BERNANKE: 'TOO EARLY' TO SAY U.S. 'WEATHERED FISCAL' RESTRAINT
- BERNANKE SAYS INFLATION, JOBS SIGNAL MORE FED STIMULUS NEEDED
So on one hand Bernanke admitted he had to pop the HY bubble with the Hilsenrath leaks a few weeks ago (talk the market down), but is happy to take the equity gains in hopes they will trickle down to wealth effect, inflation and employment even if credit is spooked (and the bond market technically corrupted).
Bernanke admits the bond market is broken:
Bernanke on collateral shortage: "There may be some pressure on the supply of safe assets"
However, per Ben, it is only a "little" broken: according to Bernanke he does not remove collateral from the market via monetization because the Reserves he creates are a form of High Quality Collateral, as the TBAC inferred in this refunding slide [4]. However, as the TBAC also explained with the following two slides (here [5]and here [6]) this private to public collateral transformation is not working out quite as expected. That, however, is irrelevant to Ben, who is always ready to do more oblivious of the effects.
- BERNANKE SAYS FALLING INFLATION CAN BE BAD FOR AN ECONOMY
- BERNANKE SAYS `OVERALL THRUST' OF POLICY HIGHLY ACCOMMODATIVE
So keep buying - they'll always be a greater fool (The Fed) to sell to, no matter how much we destroy the markets.
[7]