WATCH LIVE - Bernanke's Senate Testimony On QEternity

• Full Recap Is Here - Live Blog

Classic moment.  Senator just asked Bernanke if he thinks Congress will ever produce a balanced budget in his lifetime.  Bernanke stumbled before admitting that it was unlikely.

Fed's Balance Sheet Headed To $4 Trillion...

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Bernanke's Bubble Theme Song if you get bored (Nancy Sinatra):

Would you like to ride in my beautiful balloon.

Photo by William Banzai7

Comments

[DailyBail]

WASHINGTON (MarketWatch) — Federal Reserve Chairman Ben Bernanke sent a strong signal Tuesday that he backed the continuation of the central bank’s $85 billion bond-buying program.

http://www.marketwatch.com/story/bernanke-qe-benefits-clear-risks-manageable-2013-02-26?dist=lcountdown

[DailyBail]

Bernanke endorses Japanese prime minister's fight against deflation

http://blogs.marketwatch.com/election/2013/02/26/live-blog-of-bernankes-first-day-of-testimony-before-congress/

[DailyBail]

‘Ungovernable’ Italy: Debt crisis back on table

http://www.marketwatch.com/story/ungovernable-italy-debt-crisis-back-on-table-2013-02-26

[DailyBail]

Exit polls show Bersani to win Italy vote

http://www.marketwatch.com/story/exit-polls-show-bersani-to-win-italy-vote-reports-2013-02-25

[DailyBail]

WASHINGTON (MarketWatch) -- A gauge of consumer confidence jumped up in February, led by brighter expectations, after dropping in the prior month, according to data released Tuesday. The Conference Board said its consumer-confidence index rose to 69.6 in February, the highest level in three months, far exceeding analysts' estimates of 62.3.

http://www.marketwatch.com/story/consumer-confidence-jumps-up-in-february-2013-02-26

[Josie]

DB-the Bernank just told the Senate cmtee that The Fed does not have to shrink the balance sheet...ever...

What does that mean?

What does his so-called run-off mean?

Back in '08-'09, did not The Bernank tell the cmtee that shrinking the balance sheet, post bailout, should not be a problem?

[DailyBail]

Back in '08-'09, did not The Bernank tell the cmtee that shrinking the balance sheet, post bailout, should not be a problem?

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Yes he did. It was much smaller back then. This is the first I've heard him say, they never have to shrink it.

[Josie]

I am not making this up. He said it. Could not believe it.

What does it mean it is not shrunk? It just sits there, like the trillion dollar platinum coin?

[DailyBail]

Yes, it would mean the Fed would just hold the assets until maturity. They would slowly drop off over time. There are risks with this approach however. Here's a quick link I found.

http://www.slate.com/blogs/moneybox/2013/01/29/fed_balance_sheet_unwinding_john_taylor_is_wrong.html

The Fed Doesn't Ever Have To "Unwind" Its Balance Sheet

[DailyBail]

Bernanke says, don't bring back Glass-Steagall.

http://blogs.marketwatch.com/election/2013/02/26/live-blog-of-bernankes-first-day-of-testimony-before-congress/

[DailyBail]

Bernanke just dismissed the $83 billion benefit produced by Bloomberg. "It's just one study," he says.

Sen. Warren asks about the $83 billion benefit big banks get as implicit subsidy. "Those expectations are incorrect," Bernanke says in reply.

[DailyBail]

Bernanke doesn't see evidence of stock market bubble.

Corker asks, what firm if failed would pose systemic risk to economy.... Name them. Bernanke points out FSOC still determining non-bank firms that are systemically risky.

[DailyBail]

Sen. Merkeley asking about "too big to jail," and specifically, about HSBC money laundering and LIBOR abuses.

Bernanke says no firm or individual should be above law. (Insert sarcastic jibe here.)

[DailyBail]

Diminishing return on QE? Bernanke: "It's a good question," he says. He does point out while market impact seems less, banks willing now to lend more, so more can take advantage of low rates. Bernanke is taking credit for housing improvement and car loan sales.

[DailyBail]

Bernanke replies, when it comes time to exit, "we will sell slowly with lots of notice," and also, that the Fed has ability not to sell at all and just let bonds mature. Of course, average duration of Fed's portfolio would make latter option difficult to achieve if the economy actually does start accelerating.

http://blogs.marketwatch.com/election/2013/02/26/live-blog-of-bernankes-first-day-of-testimony-before-congress/

[Josie]

Thanks DB. From your link re: John Taylor op-ed, one commentator gets it:

"What happens when you have a growing economy, banks pushing money out the door, and inflation rising from an increase in the supply of money in circulation? As MY points out, either the Fed sells off assets or it raises interest rates on its deposits, in order to meet its statutory obligation to control inflation.

But Taylor in his op-ed curiously mentions only selling assets. Perhaps he missed something, as MY believes. Or maybe this Stanford economist knows a thing or two about Fed operations, and is simply assuming the Fed will sell assets rather than raise rates if the supply of money in circulation starts to go up.

But why would he make that assumption? For one thing, the Fed has promised low rates for several more years, and it would be problematic for their institutional credibility to backtrack on that promise. But also, consider the effect higher interest rates would have on certain borrowers whose demand for credit is established by law. I'm talking about the federal government.

This, Matt, is what those of us worried about our structural deficits observe. Higher interest rates are coming. Whether they come sooner or later, the debt is growing every year. It's growing a lot, even if annual deficits stabilize. Interest rates may be low now, but so long as we run annual deficits, we are not paying down any debt. So the debt we have now will have to be rolled over. And two, five, ten years from now we will be rolling it over into higher interest rate securities, further constraining the spending power of the government, just as the cost of funding the baby boomers' old-age care is really kicking in.

So Taylor knows what Bernanke knows. He is constrained to keep interest rates low, because if rates go up, the game is up too. So asset sales it will be."

So, the Bernank stating to the Senate cmtee that The Fed does not have to sell and shrink the sheet is a red herring. He knows that will not happen...

Yikes...

[Josie]

The Bernank:

http://www.youtube.com/watch?v=zDAmPIq29ro

[Josie]

The Bernank to savers and seniors:

http://www.youtube.com/watch?v=qdFLPn30dvQ

[DailyBail]

Nicely done Josie. One of the all-time great comedies.

[SKINFLINT]

agreed.