Ben Bernanke is no Oracle at Delphi, but traders still act like all this banking stuff is very opaque.
Although the federal government is closed due to snow, Fed Chairman Ben Bernanke decided not to wait for today’s congressional hearing to be rescheduled to release his statement. In it, he pointed out something exceedingly obvious: The Fed’s actions to keep short-term interest rates at zero are going to have to end at some point.
“Although at present the U.S. economy continues to require the support of highly accommodative monetary policies, at some point the Federal Reserve will need to tighten financial conditions by raising short-term interest rates and reducing the quantity of bank reserves outstanding,” he wrote.
Markets reacted as though the news that interest rates won’t stay at nearly zero forever was shocking — and as though “at some point” might come tomorrow. The Dow dropped 40 points in the 90 minutes after Bernanke’s 10-page statement was released. The best explanation of why everyone freaked out came from someone who himself swore he wasn’t freaking out.
“Saying it will raise rates ‘before long,’ obviously there’s no specifics but it does put potential rate increases back on investors’ minds,” said Alan Lancz, president of Alan B. Lancz & Associates. “Before, it was considered not in the foreseeable future.”
In other words, the people to whom Americans with 401k’s, Roth IRAs and other retirement accounts are entrusting their non-foreseeable futures were unable to conceive of a point in the near term at which the Fed would return interest rates to something approaching historical norms, and have been investing your money as though the crisis would last forever.
No wonder Chase CEO Jamie Dimon expects a financial crisis every five to seven years.
$1.3 Million for Brown
The GOP’s candidate in the Massachusetts special election raised more than one million dollars -- double the goal -- in a 24-hour moneybomb on the Ron Paul
$1.89 billion given to states to fight HIV
The federal government Monday announced more than $1.89 billion in funding to states to fight the HIV epidemic with access to care and with more cash for the failing AIDS Drug Assistance Program. According to an HHS press release , $813 million of that money will go directly to the ADAP programming. An additional $8,386,340 will be issued as a supplement to 36 states and territories currently facing a litany of unmet needs and access issues.
1. Brian Schweitzer
As governor of Montana, Schweitzer doesn’t represent one of the most highly populated, high-profile electoral states in the country. But this
#1 in Conspiracy Theories
Andrew Young’s tell-all biography of John Edwards, hitting shelves next week, is surging in one Amazon.com category in particular. #1 in Conspiracy
$1.3 trillion in federal spending unaccounted for, report finds
Despite calls for independent bodies to keep government accountable, the Sunlight Foundation’s most recent Clearspending report has found the federal
1 Brigade and 1 Battalion
ISTANBUL – It’s 10 p.m. in the lowest level of the Istanbul airport. In 20 minutes I’ll be allowed to board my plane to Kabul, bringing me to the
Ten Loopholes That Can’t Make It Into FinReg
Dan Pfeiffer, the White House communications director, wrote a blog post that lists the loopholes lobbyists most want inserted into Sen. Chris Dodd’s (D-Conn.)
$1 Million for Toomey
Pat Toomey, the former Club for Growth president and leading Republican candidate in Pennsylvania’s 2010 Senate race, has announced a $1 million haul in the
1. Lindsey Graham
Sen. Graham (R-S.C.) is typically regarded as a reliable vote for his party, but he took the bold step of breaking with his fellow Republicans to join Kerry
Bachmann uncomfortable over earmarks ban
Republicans appear to have boxed themselves into a corner with their portrayal of earmarks as wasteful spending, as many of them have backed a moratorium on
Troubled mine holds hope for U.S. rare earth industry
China currently controls 97 percent of the world’s rare earth production. The Mountain Pass Mine could change that -- if it can overcome serious environmental concerns.