Translating Bernanke's Ultra Transparent QE Speech

As much as I dismiss Chairman Bernanke, I welcome his capacity for transparency. In his speech in Boston this morning, he made some stunning revelations:

"It may be difficult to convey the Committee’s policy intentions with sufficient precision and conditionality.”

Translation: "We're making this stuff up as we go along."


“At current rates of inflation, the constraint imposed by the zero lower bound on nominal interest rates is too tight and the risk of deflation is higher than desirable."

Translation: "Rates are near zero so we're basically out of bullets."


"The central bank could also expand its securities holdings, which has in the past been 'successful' at lowering interest rates. But the Fed doesn’t have much experience with that tool, which makes it difficult to decide the appropriate quantity and pace of purchases and to communicate this policy response to the public."

Translation: "No, we really are out of bullets. I'm not kidding."


“Nonconventional policies have costs and limitations that must be taken into account in judging whether and how aggressively they should be used.”

Translation: "Besides, QE would totally pollute our balance sheet, and we're really not sure if we feel like doing that."


“These factors have dictated that the FOMC proceed with some caution in deciding whether to engage in further purchases of longer-term securities.”

Translation: "OK, so we're really, really not sure about it."


“Central bank communication provides additional means of increasing the degree of policy accommodation,” Bernanke said. “A step the Committee could consider, if conditions called for it, would be to modify the language of the statement in some way that indicates that the Committee expects to keep the target for the federal funds rate low for longer than markets expect.”

Translation: "So instead we'll continue to openly engage in PR and jawboning to influence market expectations, until we lose all credibility."


Don't just take my word for it. Gary Jenkins, head of fixed-income at Evolution Securities Ltd. in London, told Bloomberg that, with regards to quantitative easing, Bernanke is saying, "‘We are going to do it, but we don’t quite know exactly how we are going to do it.’”

Translation: "Don't count on it."