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Friday, August 31

31st Aug - US Close: Bernanke's Apology

We got nothing out of the Jackson Hole - except more promised that they are worried and are really carefully watching the situation and so on. Long US weekend coming, with Monday being a holiday. Take the time to relax, check these quick comments on the Fed and come back for my weekend posts.
Earlier on MoreLiver’s:
31.8. Best of August most read pieces + all my ’views’
Suomen kansan Varjelus ja suuri Ajattelija puhuu tänään. Kaikki kuulolle. Nerokkaita analyysejä, viiltävää logiikkaa ja aivot sumentavaa viisautta on tarjolla. Kello 10.05 Ykkösaamussa: Jyrki Katainen, Karpaattien Nero ja Ajatusten Tonava kertoo missä mennään. Olen tilannut kirkonkellot soimaan kello 10.00 neljäksi minuutiksi. Sen jälkeen valtakunnassa on minuutin hiljainen hetki, kunnes niskalenkittäjä über alles jakaa meille sulaa viisauttaan. Nöyrtykäämme Hänen edessään. - Aksuli

Roundups & Commentary
Markets – Between The Hedges
Tyler’s European Summary – ZH
  European Stocks Explode Higher As Spanish Bonds Implode
Tyler’s US Summary – ZH
  Gold Soars To Near Six Month High As Silver Overtakes Stocks In 2012

TV: Bloomberg, BBC
Debt crisis: live – The Telegraph
The Euro Crisis Blog – WSJ
Tracking Europe’s Debt Crisis – NYT
FX Options Analytics – Saxo Bank
European 10yr Yields and Spreads – MTS indices

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Algos Set New Speed Reading Record: 4549 Words In 20 MillisecondsZH
In a mere 20 milliseconds, the world's 'traders' had managed to read Bernanke's 4549-word script, interpret it (as bearish in this case - which apparently is wrong now?) and start to sell down the major equity indices…trades were timestamped 'before' the bids and offers were even seen in the data-feed.

Jackson Hole Speech PragCap
I’ve attached the entire Jackson Hole speech here by Ben Bernanke.  It doesn’t appear to contain anything out of the ordinary.  Perhaps the Fed’s most powerful tool at this point is just leaving the empty bazooka on the table letting traders stare at with the worry that he’ll pick it up….

Initial Reaction to Bernanke: USD and US Assets FirmMarc to Market
…Bernanke is not committing the Fed to a new round of asset purchases at this juncture. He does sketch out the economic challenges, but stops shy of advocating a particular response. Next week's US employment report is still key.

Ben's J-Hole Speech: Goldman's TakeZH
Fed Chairman Bernanke's Jackson Hole speech makes the case for unconventional monetary easing--in particular, balance sheet and communication policies--as an effective tool, even if the "hurdle is higher" for the use of such policies. In a dovish conclusion, he notes the poor state of the labor market as a "grave concern".

Bernanke Makes Case for Further Stimulus to Help JoblessBB

Bernanke says Fed ready to act but short on specificsReuters

Bernanke at Jackson HoleTim Duy’s Fed Watch
On net, Bernanke's speech leads me to believe the odds of additional easing at the next FOMC meeting are somewhat higher (and above 50%) than I had previously believed.

Bernanke: more action is needed, but no news on how and whenNordea
The bar for QE3 is fairly high, as there are good reasons for the Fed to conserve its limited ammunition should things get much worse. For now, QE3 seems most likely in case of policy errors in either the Euro area or the US

Bernanke defends Fed policy - more easing aheadDanske Bank (pdf)
The Chairman’s downbeat comments on the labour market lead us to maintain our view that the Fed will engage in a new round of QE at the September meeting, although this remains a close call.

Bernanke manages to toss a bone to Wall Street and WashingtonMacroScope / Reuters
…both investors and politicians what they wanted to hear – that “the stagnation of the labor market in particular is a grave concern” – all while saying next to nothing new about where U.S. monetary policy is actually headed.

Bernanke in the HoleKrugman / NYT
Um, sit on our hands some more, and think very seriously about maybe, someday, doing something.

Jackson Hole was a snooze fest as market tries to reactSaxo Bank
Bernanke’s speech offered the market virtually nothing to go on, even less, in fact than the very little the market was expecting. Was there anything worth reacting to?

Jackson Hole cliffhangerSaxo Bank
Today's Jackson Hole speech from Bernanke sustains the Fed policy of maintaining the QE3 cliffhanger: make lots of vague promises but don't mention the specifics.

Bernanke on the defensiveFelix Salmon / Reuters
The overall tone here, then, is defensive: Bernanke’s on the back foot, trying to justify past and future actions against critics on all sides. And when an institution is in a defensive crouch, it’s not going to do anything bold. The Fed was bold in 2008-9, at the height of the financial crisis; those days are over now.

Parsing Ben Bernanke: More Fed action is on the wayWonkblog / WP
That’s vague, and probably purposefully so. But coming after a long argument that quantitative easing has worked in recent years, and a rejection of structural arguments that, if correct, mean that more easing will be ineffective, it’s hard not to see it as an indication that more aggressive Fed action is on the way.

Bernanke Signals Readiness to Do MoreWSJ
A defiant Ben Bernanke sought to shoot down criticism of the Federal Reserve's easy-money policies and strengthen the case for new efforts by the central bank to bring down what he described as gravely high unemployment.

The Road to QE3Free exchange / The Economist
What most outsiders can't appreciate about the job of Fed chairman is that among his unwritten responsibilities is maintaining the integrity and credibility of his institution for his successors. There are two ways this can be lost: by doing too little in the face of either too high unemployment or inflation; the other is by doing too much, with activism that prompts a backlash against the institution that constrains its ability to act again. If Mr Bernanke has calculated correctly, he has found a path between the two.

Some Heavy Duty Weekend ReadingPragCap
The most interesting stuff was not Bernanke’s speech.


Bernanke says the Fed can do more but…Credit Writedowns
I do think QE has very negative long-term side effects in terms of capital allocation and private portfolio preferences that are now all around us. William White recently pointed this out. Still, Bernanke is in a damned if you do, damned if you don’t situation. Whatever he does or doesn’t do, the Fed will be pilloried by leading economists who are at once very divided on what the Fed should do and very vocal about their opinions.

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