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The snow job

Federal Reserve Chairman Ben Bernanke was supposed to testify on Capitol Hill today about the Fed's "exit strategy." But like everyone else in the Northeast, Bernanke is stuck at home wearing slippers. Still, his testimony was released to the public. Wanna know why? Because the financial markets have a cheap money addiction and need to know whether they'll keep getting their fix.

We talked about this at our morning meeting -- the fact that Bernanke's comments were released even though he didn't actually testify. As Kai Ryssdal put it, this was a psychological move to train the market for what's coming from the Fed: "Brace yourself, baby, 'cause here it comes."

But like a parent who ignores his strung-out teenager, Bernanke didn't really say anything. From his testimony:

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.

At some point, we'll get around to it. Don't worry, there's still plenty of dope left.

By the way, which US economy requires "highly accomodative monetary policies"? The cheap money isn't getting to the consumer. It isn't going to small business. It isn't creating jobs. It's going to banks and other big-time investors. They're pouring it onto bank balance sheets and into currencies, bonds, stocks and other foreign investments, potentially creating the same kind of bubble that got us into this situation. And why not? The money's free.

GDP is up, but there are questions about how firm that growth is. I have to agree with many of the comments in this CNN piece:

I also thought this New Zealand reaction was very telling (emphasis mine):

Wary investors interpreted comments by Federal Reserve chairman Ben Bernanke about the eventual unwinding of emergency liquidity programs as a sign that US interest rates were poised to rise even though he said that wasn't the case.

Traders said the reaction of some investors was bewildering given that the current environment of low interest rates was intended to see the markets through the peak of the credit crisis, which had passed.

The addicts -- as they tend to do -- have forgotten all about that part.

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