Wednesday, 2 March 2011

Bernanke clarifies things...

Anyone looking for a lesson in oratory, need look no further than this part of Ben Bernanke's answer to the question "Would you attribute the stock markets rise to QE2?"

" yes I do think that er by taking these er securities out of the market and pushing investors into alternative assets erm we er we have led to higher er stock prices and to lower stock market volatility. By the way er when we the last time we did this in march 2009 was about a week before the absolute minimum where the standard and poor was in the six hundreds er and following our actions standard and poor, the stock market, rose quite considerably. So yes em the the policy is affecting the er er the stock market in really in two ways, one is by er, is by through, is by lowering essentially long term yields and forcing investors into alternative assets but also because er as this is process has been working through and as we have seen, er both in the earlier episode that a few months after we began the process we began to see a stronger economy this time we really began this process in August and now four or five months later, we’re seeing a stronger economy. As the markets see the stronger economy materialising that’s er incorporated into expectations about future profits and future economic activity and that causes the market to rise as well so it’s a virtuous circle in that respect. So as I described in my remarks, the whole idea here is to is to move interest rates and to move asset prices in a direction that will stimulate more economic activity, put more people back to work, and moo, and get rid of risk of deflation and create a stable price environment”

Don't worry, the world is in safe hands.

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