I am not in front of a TV so I cannot hear the 'in depth' analysis of Mr. Bernanke's testimony but clearly whatever was said, not enough pixie magic dust was offered by the man who walks on water. The market has blown a gasket since 2 PM. Why we worship at the false idol whose forecasts of the future have been as solid as those of any random humanoid I could pull off the street, is beyond me - but in times of distress humans tend to look for some sort of leadership. While I understand the fact if you put 10 economsits in a room you'll get 11 opinions, let's just say this is not the guy to look at for any form of accurate forecasting. [Jul 29, 2009: Mises.Org - the Ben Bernanke is Wrong Video]
He does know how to throw free money in every direction at a pace that would make Greenspan blush so therefore I understand his hero status on Wall Street.
Yesterday the market reversed on a rumor of an imminent change coming in policy in regards to paying interest on banks reserves held at the Fed. The idea here is if you give the banks 0% interest they will indeed be forced to lend money to make money.... and the economy will once more return to a happy place. The minor problem with this is lack of end demand of money from an overindebted U.S. consumer. She has years of develeraging to go... and frankly the U.S. economy has become so dependent on free and easy credit when you return to ANY form of risk based credit pricing (i.e. people with good credit get good terms, people with bad credit get bad terms or are locked out) you have what we have today. It is not banks not willing to lend.... it is those who wish to borrow generally having poor risk outlooks.
As for Quantitative Easing 2.0, I heard a great comment on CNBC about a month ago... right now we have 10 apples on the shelf and they are not selling. That was QE 1.0. Now the market is urging Ben to put another 10 apples on the shelf. What will that accomplish? Without end demand you just have 20 apples sitting there staring at you. Yes, the market will knee jerk up when this time comes (which will mark ever more desperation by the Fed) and most of the new money will flow into capital markets just as it did in 2009 and early 2010. So I guess as speculators we should be giddy on what is surely coming in the next year. But having 20 or 10 apples on the shelf really is not going to change one darn thing.