Bernanke Sees Train Wreck Dead Ahead

Bloomberg reports that Bernanke Says Fed Prepared to Act as Needed to Aid U.S. Growth. Translation: Bernanke sees growth going to zero by the end of the year. I never read the Fed Chairman's statement as anything other than propaganda. In fact, I always apply a "what do they want us to think" filter to every word out of his mouth. Why? No exclusively because I'm cynical. It would be imprudent for Bernanke to say what he really believes. It might cause panic. His job is to remain professional. So, he's going to address the current situation in a believable manner. How else can you explain why he says that the Fed's thinking about winding down crisis measures at the same time that they "remain prepared" to enact additional mysterious measures? Obviously, he's talking to the bulls in the first case and the bears in the second.

Be that as it may, I am pretty certain that Bernanke's scared stiff. What tools does Bernanke have left? Nothing. He could buy long Treasuries, but that wouldn't do much. The long bond will keep falling anyway. If growth goes back to zero, there's not much that can be done on the monetary side.