Timing of the Omen of a Financial Nemesis : FND - 8.

Risk management involves judgment as well as science, and the science is based on the past behavior of markets, which is not an infallible guide to the future.

The Economic Outlook and Monetary Policy
Chairman Ben S. Bernanke
At the Federal Reserve Bank of Kansas City Economic Symposium,
Jackson Hole, Wyoming
August 27^th, 2010

Presents a list of policy options which have or already been used with dismal results or not even plausible.

Note: for those not familiar with the Fed eggheads lingo in

"Market expectations for continued accommodative policy have in turn helped reduce interest rates on a range of short- and medium-term financial instruments to quite low levels, indeed not far above the zero lower bound on nominal interest rates in many cases."

"Zero lower bound on nominal interest rates" means "Keynes' Liquidity Trap".

Try that Google Search

What you must know is that the Zero Lower Bound is for 0% short-term interest rate and obviously, as my option model proves, it is higher for long-term yields. So we are not "not far above" but "far below."

Of course when you replace "Zero lower bound on nominal interest rates" by "Keynes' Liquidity Trap" it gets a lot more freaky!

My estimate of the use of that syntax is that it make it less frightening and you will not find on Bing or Google the amount of research the Federal Reserve System did on the subject since 1994.

Bernanke Says Fed Will Do 'All It Can' to Ensure U.S. Recovery

I am sure "It will do all it can" - the problem is I am also sure it can't do anything!


Market expectations for continued accommodative policy have in turn helped reduce interest rates on a range of short- and medium-term financial instruments to quite low levels, indeed not far above the zero lower bound on nominal interest rates in many cases.

"The issue at this stage is not whether we have the tools to help support economic activity and guard against disinflation. We do. As I will discuss next, the issue is instead whether, at any given juncture, the benefits of each tool, in terms of additional stimulus, outweigh the associated costs or risks of using the tool."

The burden of proof is on him and he didn't describe specific and credible tools. In the meantime I have proved that none of the tools he and his eggheads have envisioned work.

Even if the Fed did the "unexpected," buy stocks to avert a crash, it would be met with a resounding failure:

At 1 p.m. on the same day (October 24), several leading Wall Street bankers met to find a solution to the panic and chaos on the trading floor.The meeting included Thomas W. Lamont, acting head of Morgan Bank; Albert Wiggin, head of the Chase National Bank; and Charles E. Mitchell, president of the National City Bank of New York. They chose Richard Whitney, vice president of the Exchange, to act on their behalf. With the bankers' financial resources behind him, Whitney placed a bid to purchase a large block of shares in U.S. Steel at a price well above the current market. As traders watched, Whitney then placed similar bids on other "blue chip" stocks. This tactic was similar to a tactic that ended the Panic of 1907, and succeeded in halting the slide that day. In this case, however, the respite was only temporary.