I Like Bernanke's Candor

The more Bernanke speaks, the more I respect his candor. What a refreshing change from that money-changer Greenspan who made a sport of obfuscation.

Today before the Senate, Bernanke admitted some things that make my life easier. He confirmed that what I've been saying all along is correct.

First there was this from Marketwatch:

"We are not prepared at this point to take further action," Bernanke told the Senate Banking Committee, in the second of two days of testimony to Congress on monetary policy.

I've been saying this for many months.

Then KUSI News from San Diego reported this with regard to a third round of stimulus:

Besides a third round, Bernanke laid out two additional options if the economy gets weaker:

- The Fed could offer financial markets more clarity about how long it intends to leave interest rates at record lows, where they have stood since December 2008. For now, the Fed says only that rates will remain "exceptionally low" for an "extended period."

- It could start paying banks less interest on the excess money they park with the Fed. It doesn't pay much now - 0.25 percent. But paying even less would encourage the banks to loan the money out rather than sending it to the central bank.

Then his most candid point was something I found on the Twitter stream posted by FuturesTrader71 (still trying to confirm it in mainstream news):

Fed's Bernanke says further monetary easing may not be needed, may not be effective given configuration of problems we have (9:53 CT)

There comes a time when further monetary stimulus has no further effect. The same is true all throughout life. Ask any drug addict. This is an open admission by the chairman of the Federal Reserve that the game is over for him and the rest of the Keynesians if the economy does not get better.

However, when one of the only two policy responses you have as a central bank to a worsening economy is an offer of more clarity to financial markets about how long you intend to leave interest rates at record lows . . . you can bet the economy will get worse.

When the other response is lowering an interest rate that currently sits at .25 percent, you can bet the economy will get a LOT worse.