Mike Shedlock

The non-news of the day is Bernanke says scope for more Fed easing

Federal Reserve Chairman Ben Bernanke says there’s room for the central bank to take more action in responding to critical questions from a top lawmaker on Capitol Hill.

Bernanke’s letter to Darrell Issa, the California Republican who heads the House Oversight and Government Reform committee, was dated Wednesday and obtained by MarketWatch on Friday. Issa had written Bernanke at the beginning of August and asked questions largely put forward by economists Allan Meltzer, David Stockman and Andy Kessler.

“There is scope for further action by the Federal Reserve to ease financial conditions and strengthen the recovery,” Bernanke said, in comments that largely echo what was said in the minutes of the last Federal Open Market Committee meeting that ended Aug. 1. He did allow there are potential costs and risks to consider before taking action.

He also said that so-called Operation Twist was still working its way through the economy, but that the fact the bond-swap program is still under way does not preclude further action. “Because monetary policy actions operate with a lag, the stance of policy must necessarily be set in light of a forecast of the future performance of the economy,” he said.

Why Not Flip Coins?

"Fed policy must necessarily be set in light of the future performance of the economy" says Bernanke. Why bother? The Fed has a perfect track record of not being able to predict anything.

Bernanke was wrong about housing, the recession, unemployment rate in the recovery, and he has admitted that he does not understand why the job recovery is weak. Yet, he is beholden to his own silly forecasts.

Why bother with forecasts? Why not flip coins instead? The results would be far more accurate.

Treasury Carry Trade

Please note Bernanke's official denial on bank carry trades and the tax on savers.

Mike Shedlock

Mike Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management.

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