A glimpse at the wordcloud of Bernanke's farewell speech this morning tells you all you need to know about the Fed's extraordinary policies - the two most-used words are "think" and "know". From "hoping" the Fed did the right thing to explaining how Main Street "needs to understand what they did was necessary," Bernanke admits that they still have no idea how QE works "QE is at least somewhat effective... works in practice but not in theory," and almost admitted that the Fed's new plan 'forward guidance' worked in theory but not in practice. The "populist reactions" around the world to central bank interventions are "probably not avoidable," he adds, also noting in his awkward 'don't pin me down' manner that stocks are not in a bubble, but "in historical ranges."
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On The Crisis...
- *BERNANKE SAYS FED'S LENDER OF LAST RESORT ROLE IS ESSENTIAL
- *BERNANKE SAYS HE HAD CLOSE PARTNERSHIP WITH PAULSON, GEITHNER
- *BERNANKE SAYS BUSH GAVE PAULSON, BERNANKE LOTS OF `LEEWAY'
- *BERNANKE AGREED WITH PAULSON, GEITHNER ON NEED FOR BANK RESCUES
- *BERNANKE SAW NO CHANCE OF TARP PROGRAM PRIOR TO INTENSE CRISIS
- *BERNANKE: PARLIAMENTARY SYSTEMS WERE MORE RESPONSIVE IN CRISIS
- *BERNANKE SAYS CRISIS WASN'T CONTINUOUS BUT EBBED, FLOWED
- *BERNANKE: MOST INTENSE PHASE OF CRISIS INVOLVED FANNIE, LEHMAN
- *BERNANKE SAYS `MUCH OF GOOD WORK' WAS TO STABILIZE MARKETS
On Fed Independence...
- *BERNANKE SEES NEED TO INSULATE FED FROM POLITICAL PRESSURE
- *BERNANKE SAYS NEW REGULATION SHOULD BRING GREATER STABILITY
- *BERNANKE SAYS FED CAN'T BEND TO SHORT RUN POLITICAL PRESSURES
On Helping Main Street...
- *BERNANKE SAYS `PEOPLE WILL UNDERSTAND' FED TOOK NEEDED STEPS
- *BERNANKE SAYS CRISIS ACTIONS WERE AIMED AT HELPING MAIN STREET
- *BERNANKE SAYS FED `DID THE RIGHT THING, I HOPE'
Bernanke explains how he "hopes" they are right...
BERNANKE: So we did the right thing, I hope. We tried to do the right thing. And there certainly has been pushback. We hope that, as the economy improves and as we tell our story, and as more information comes out about, you know, why we did what we did and so on, that -- you know, that people will -- will appreciate and understand that what we did was necessary, that it was in the interest of the broader public, it was a Main Street set of actions aimed at helping the average American. And as time passes and that becomes clearer, I'm hopeful that these political concerns will wane.
- *BERNANKE: `NOT SURPRISING' TO SEE POPULIST REACTION TO FED
- *BERNANKE: FINANCIAL CRISES OFTEN LEAD TO POPULIST REACTIONS
Bernanke explains how the protesters need to get with the program...
BERNANKE: It's -- you know, if you look around the world, there -- there are populist reactions, you know, in most countries where there were serious financial crises, and that's probably not avoidable completely. And what we have to do is -- again, to explain what we did, why we did it, and try to win back the confidence of the -- of the public. And that's, I think, an important objective for all of us around the world.
On QE...
- *BERNANKE SAYS FED HAS TOOLS TO TIGHTEN MONETARY POLICY
- *BERNANKE SAYS STUDIES SHOW QE IS AT LEAST SOMEWHAT EFFECTIVE
- *BERNANKE SAYS QE HAS `BEEN HELPFUL'
- *BERNANKE SAYS QE IS A `BASIC MONETARIST PRINCIPLE'
- *BERNANKE SAYS QE FOUNDED ON `A BASIC MONETARIST PRINCIPLE'
- *BERNANKE SAYS QE WORKS IN PRACTICE BUT NOT IN THEORY
- *BERNANKE SAYS INFLATION NOT A SIGNIFICANT RISK OF QE
- *BERNANKE SAYS INFLATION IS NOT A BIG RISK OF QE
- *BERNANKE SAYS FED TOOLS EFFECTIVE EVEN WITH BIG BALANCE SHEET
- *BERNANKE SAYS FED HAS TOOLS TO ENSURE QE ISN'T INFLATIONARY
Bernanke admits they were winging it and almost admits that forward guidance is just as unproven:
AHAMED: So, in devising QE and all these other unconventional monetary policies, were you pretty confident that the theory would work or that whatever you -- that -- going into it?
BERNANKE: Well, the problem with QE is that it works in practice, but it doesn't work in theory. That's...
AHAMED: Yeah. Right. (LAUGHTER) And the other way about forward guidance, probably.
BERNANKE: Right -- well, I -- I'm -- urrr
On Bubbles:
- *BERNANKE: FED SENSITIVE TO RISK TO FINANCIAL STABILITY
- *BERNANKE: MARKETS BROADLY WITHIN HISTORICAL RANGES
- *BERNANKE SAYS FED LOOKING AT IMPLICATIONS OF ANY IMBALANCE
Bernanke gets entirely tongue-tied in his efforts to not admit that there is no bubble:
AHAMED: But sort of bottom line for the moment, you're not worried about too much froth in financial markets?
BERNANKE: Well, it's always, of course, bad luck to make any forecast about any particular market. (LAUGHTER) But the -- the markets currently seem to be broadly within -- you know, the metrics of market valuation seem to be broadly within historical ranges. The financial system is strong. The key financial institutions are well-capitalized.
On ZIRP Forever...
- *BERNANKE NOT CONCLUDING VERY LOW RATES A `PERMANENT' CONDITION
- *BERNANKE:BETTER BALANCE IN GROWTH COULD AVOID ZERO-LOWER-BOUND
- *BERNANKE: FISCAL POLICY COULD HELP AVOID ZERO-LOWER BOUND
On Real Economy...
- *BERNANKE SAYS REASONS FOR SLOW PRODUCTIVITY GROWTH NOT CLEAR
- *BERNANKE SAYS PRODUCTIVITY INCREASE HAS BEEN VERY SLOW
- *BERNANKE: FALL IN LABOR PARTICIPATION PARTLY LONG-TERM TREND
Bernanke explained that Main Street is just too dumb to get it...
Because my sense is, the American people -- Main Street, Wall Street -- there's still a great deal of confusion, and I think we're paying the consequences of it even today.
BERNANKE: Well, it was a big challenge to explain what was going on. And, you know, at the Federal Reserve, we tried to do it. We didn't always succeed, I'm sure.
- *BERNANKE SAYS FED HAS HELPED ECONOMY, FISCAL SITUATION