Reading Bernanke at Jackson Hole

Bernanke stated that stagnation in labor markets is "grave concern" and additional support will come "as needed". The costs of nontraditional policies "appear manageable". However, a close read of the speech suggests that Bernanke is weighing costs and benefits and that he is aware that costs of further nontraditional policy moves are not trivial.

The speech was called "Monetary policy since the onset of the crisis". It provided a good review of the policy actions of the Fed, but it was a biased view from the architect of those policies. LSAP (Large Scale Asset Purchases) did have the effect of lowering rates, but the impact on labor markets has still been muted. Labor markets may not respond to lower rates.

Bernanke provided a good review of the costs of a LSAP program. The Fed does not have to face these costs yet but they are real and the LSAP program of yesterday will be the LSAS (Large Scale Asset Sale) program of tomorrow.

what is missing is that the LSAP have lowered rates and put more money in the economy, but the amount of excess reserves held by banks is huge by historical standards. The money is not being criculated to credit economic growth. Borrowers do not want to borrow and lenders only want to hold Treasuries.