Here is Bernanke’s Speech yesterday at The Stamp Lecture in London, and note that while I understand Mish Shedlock has written something on this, I have not read it; any similarities are due to Ben being a total idiot.

I actually watched him present this time along with the questions and Ben looked like he had sat on a Rhino horn a few minutes prior. Maybe it was still in there. In any event, I feel it is necessary to translate some of the Fed Speak into a common language called English for the benefit of readers, since Fed Speak is a curious dialect and can be difficult to understand.
Here we go!

“….although the subprime debacle triggered the crisis, the developments in the U.S. mortgage market were only one aspect of a much larger and more encompassing credit boom whose impact transcended the mortgage market to affect many other forms of credit. Aspects of this broader credit boom included widespread declines in underwriting standards, breakdowns in lending oversight by investors and rating agencies, increased reliance on complex and opaque credit instruments that proved fragile under stress, and unusually low compensation for risk?taking.”

In English: We had the responsibility to monitor banks, set reserve requirements and keep leverage ratios reasonable. We abdicated all of the above on purpose and got in on the scam because our various Fed Boards are all made up of former, current, or wanna?be?future bankers who make lots of money by cheating the rules of sound banking. This produced a huge credit boom, and it was entirely intentional. Oh, and we knew it would go bust too ? we didn’t care.

“The abrupt end of the credit boom has had widespread financial and economic ramifications. Financial institutions have seen their capital depleted by losses and write downs and their balance sheets clogged by complex credit products and other illiquid assets of uncertain value. Rising credit risks and intense risk aversion have pushed credit spreads to unprecedented levels, and markets for securitized assets, except for mortgage securities with government guarantees, have shut down. Heightened systemic risks, falling asset values, and tightening credit have in turn taken a heavy toll on business and consumer confidence and precipitated a sharp slowing in global economic activity. The damage, in terms of lost output, lost jobs, and lost wealth, is already substantial.”

In English: CRAP! We were supposed to have gotten all the profits out of the country and into Paraguay, along with numbered Swiss Accounts before this thing went pear?shaped, but we blew it. Those jackass Americans ran out of money to make the payments with before we could complete our scheme.

“The global economy will recover, but the timing and strength of the recovery are highly uncertain.”

In English: I’m lying.

“Government policy responses around the world will be critical determinants of the speed and vigor of the recovery.”

In English: Ok, I’m lying unless I can get the taxpayer to take all this crap on and not lynch me. Ok, ok, ok damnit, even then I’m lying, but that way I can get the money out to Paraguay (those bastards at UBS are turning in the people with the Swiss accounts!)

” I will also explain why I believe that the Fed still has powerful tools at its disposal to fight the financial crisis and the economic downturn, even though the overnight federal funds rate cannot be reduced meaningfully further.”

In English: The most powerful tool I have is the BS that spews from my mouth, and that happens whenever my lips are moving. See?

“The Federal Reserve has responded aggressively to the crisis since its emergence in the summer of 2007.”

In English: We sure as hell knew it was coming; after all, we created it.

“These policy actions helped to support employment and incomes during the first year of the crisis. Unfortunately, the intensification of the financial turbulence last fall led to further deterioration in the economic outlook. The Committee responded by cutting the target for the federal funds rate an additional 100 basis points last October, with half of that reduction coming as part of an unprecedented coordinated interest rate cut by six major central banks on October 8. In December the Committee reduced its target further, setting a range of 0 to 25 basis points for the target federal funds rate.”

In English: We can’t possibly let the game end until we get the money out of the United States (and ourselves too.) We got the BLS to lie about employment and incomes have been declining in real dollars since 2000; heh, remember what I said about my lips moving?

“The Committee’s aggressive monetary easing was not without risks.”

In English: We knew it wouldn’t work.

“However, the Committee also maintained the view that the rapid rise in commodity prices in 2008 primarily reflected sharply increased demand for raw materials in emerging market economies, in combination with constraints on the supply of these materials, rather than general inflationary pressures.

In English: We’re good at creating bubbles, but not so good at figuring out where they will emerge. We pumped liquidity to try to pump up another bubble to take over from the housing mess, but unfortunately what we got was a bubble in commodities, especially oil. That totally screwed the economy instead of hiding the exploded housing bubble. We suck, and we hope you don’t figure it out.

“As you know, commodity prices peaked during the summer and, rather than leveling out, have actually fallen dramatically with the weakening in global economic activity. As a consequence, overall inflation has already declined significantly and appears likely to moderate further.”

In English: The bubble popped. Again. Damn.

“However, that offset has been incomplete, as widening credit spreads, more restrictive lending standards, and credit market dysfunction have worked against the monetary easing and led to tighter financial conditions overall. In particular, many traditional funding sources for financial institutions and markets have dried up, and banks and other lenders have found their ability to securitize mortgages, auto loans, credit card receivables, student loans, and other forms of credit greatly curtailed. ”

In English: We prompted everyone in the banking system to lie. Therefore, nobody trusts anyone, especially us. Would you loan a $3 hooker $500,000 to buy a house? Me neither.

“One important tool is policy communication. Even if the overnight rate is close to zero, the Committee should be able to influence longer?term interest rates by informing the public’s expectations about the future course of monetary policy.”

In English: We lie a lot. If we lie often enough, some people might believe us. This is helped materially if we can keep our story straight, but that’s difficult. Thank God for computers and the key, but may the Good Lord damn to Hell Google, which never loses anything!

“Other than policies tied to current and expected future values of the overnight interest rate, the Federal Reserve has??and indeed, has been actively using??a range of policy tools to provide direct support to credit markets and thus to the broader economy. As I will elaborate, I find it useful to divide these tools into three groups. Although these sets of tools differ in important respects, they have one aspect in common: They all make use of the asset side of the Federal Reserve’s balance sheet. That is, each involves the Fed’s authorities to extend credit or purchase securities.”

In English: We have, will, and do buy crap at full price so that banks can continue to lie, sticking the taxpayer with the bill. This will continue so long as people believe in our fabled “authorities” and don’t notice that Oz is a scrunchy old man behind a curtain who badly needs to change his Depends. Oh, that’s how Toto found me. The entire rest of this section is simply to misdirect.

“Importantly, the provision of credit to financial institutions exposes the Federal Reserve to only minimal credit risk; the loans that we make to banks and primary dealers through our various facilities are generally over collateralized and made with recourse to the borrowing firm.”

In English: Lehman was a great example of this. Oh wait; they blew up. Uh, don’t ask about all those billions in clearing lines that we can’t seem to find ? I think they were in the smoking hole where Lehman once was.

“On the other hand, the provision of ample liquidity to banks and primary dealers is no panacea. Today, concerns about capital, asset quality, and credit risk continue to limit the willingness of many intermediaries to extend credit, even when liquidity is ample. ”

In English: All the banks know they’re holding a ton of worthless crap. Of course that means they know the rest of the banks are too. When everyone’s a $4 hooker (I know, it was $3 a few minutes ago, but inflation is a bitch) in the room would you sleep with any of them?

“This facility will provide three?year term loans to investors against AAA?rated securities backed by recently originated consumer and small?business loans. Unlike our other lending programs, this facility combines Federal Reserve liquidity with capital provided by the Treasury, which allows it to accept some credit risk.”

In English: The best ratings you can buy. Literally.

“For example, we recently announced plans to purchase up to $100 billion in government?sponsored enterprise (GSE) debt and up to $500 billion in GSE mortgage?backed securities over the next few quarters. ”

In English: They’re garbage. Bet on it; if they weren’t, private investors would buy them. They won’t, so you will ? at gunpoint.

“The Federal Reserve’s approach to supporting credit markets is conceptually distinct from quantitative easing (QE), the policy approach used by the Bank of Japan from 2001 to 2006.”

In English: It didn’t work in Japan and won’t work here.

“Importantly, the management of the Federal Reserve’s balance sheet and the conduct of monetary policy in the future will be made easier by the recent congressional action to give the Fed the authority to pay interest on bank reserves.”

In English: Banks are supposed to hold actual money as reserves, but the other part of that action, which I’m not going to tell you about here, is that it allows me to unilaterally give the banks the ability to operate with no reserves at all. This of course could cause a catastrophic implosion of the entire monetary system as it is nothing more than a gross exaggeration of the intentional policy decisions that led to the serial credit bubbles in the first place. Heh, what’s that thing ticking on the podium?

“And we will take all necessary actions to ensure that the unwinding of our programs is accomplished smoothly and in a timely way, consistent with meeting our obligation to foster full employment and price stability.”

In English: We’ll cock it up at least as well as we did the last dozen times, and probably worse.

“In my view, however, fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system. History demonstrates conclusively that a modern economy cannot grow if its financial system is not operating effectively.”

In English: Most of the banks are in fact bankrupt and we’re helping them hide it.

“However, with the worsening of the economy’s growth prospects, continued credit losses and asset markdowns may maintain for a time the pressure on the capital and balance sheet capacities of financial institutions. Consequently, more capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets. A continuing barrier to private investment in financial institutions is the large quantity of troubled, hard?to?value assets that remain on institutions’ balance sheets.”

In English: I said they’re broke. Got it? All this garbage on their balance sheets is used toilet paper. How many times do I have to tell you?

“Another is to provide asset guarantees, under which the government would agree to absorb, presumably in exchange for warrants or some other form of compensation, part of the prospective losses on specified portfolios of troubled assets held by banks. ”

In English: You’ll eat it, and we’ll make sure you choke it down. We have co?conspirators at Treasury.

“The public in many countries is understandably concerned by the commitment of substantial government resources to aid the financial industry when other industries receive little or no assistance. This disparate treatment, unappealing as it is, appears unavoidable. Our economic system is critically dependent on the free flow of credit, and the consequences for the broader economy of financial instability are thus powerful and quickly felt. ”

In English: We blew serial bubbles by encouraging the irresponsible granting of credit we knew could not be paid back. This allowed our cronies to steal trillions of your dollars, and you’re still too stupid to figure it out. It is critical that we not admit this, or stop it, because if we do the public will run us out of town on a rail.

“Even as we strive to stabilize financial markets and institutions worldwide, however, we also owe the public near?term, concrete actions to limit the probability and severity of future crises. We need stronger supervisory and regulatory systems under which gaps and unnecessary duplication in coverage are eliminated, lines of supervisory authority and responsibility are clarified, and oversight powers are adequate to curb excessive leverage and risk?taking.”

In English: We did it this time, and now we’re going to do our level best to sucker you into allowing us to do it again. Have a great year!

By Douglas Middleton

If you are considering paying off Unsecured debt with an assets, like cash, your home equity, then after you read the article I urge you to see my Consumers StopDebtUSA website link.
“Relieving The Burden of Debt From Americans, One Family At A Time”

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