Bernanke Speech Notes

By Michael Sedacca  AUG 31, 2012 12:50 PM

Comparing Bernanke's 2012 Jackson Hole speech to prior speeches and analyzing exactly what he said, which was different this time.


MINYANVILLE ORIGINAL I've done a careful read-through of Bernanke's Jackson Hole speech and made some comparisons to notes I made from his 2010 and 2011 speeches. Given the progression of the financial crisis since then, the speech is focused around which "nontraditional policies" have been effective, and how. I would note that this speech bears a lot of similarities to his 2010 speech, in the way it is laid out from top to bottom.
In conclusion, I think that while this speech had some similarities to his 2010 speech, it is much more cautious. It definitely makes the case that the Fed is not in a position to conduct additional large-scale asset purchases (or LSAPs) unless conditions deteriorate significantly. I'm hearing very similar conclusions from the other people in the market that I talk to.

It also makes the case that the Fed would probably buy mortgage debt vs. Treasury debt, if they do so at all.

I also think, given some of his comments, that we may see new communication on certain targeting in nominal GDP (the output gap), inflation, and unemployment. But that is just speculation, and it could be confirmation bias.

I also thought it was odd that he mentions "limited credit  availability" as something that is holding back growth. This is at odds with what I have  been told by those in the banking and financial industry. In the majority of cases, the problem is that most people do not want to take the risk of starting loans. There's also the case where those who want loans can't get them,  and those that can, don't want them. Admittedly, I might be reaching a bit there, but this might be the difference in the academic view and the  real-world view.

Now we wait for Draghi and the ECB next Wednesday, which is arguably the much more important event.

Twitter: @MichaelSedacca

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