Fed Chairman Bernanke’s First Speech
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In his first speech as Federal Reserve Chairman, Ben Bernanke choose to focus on the “yield curve”, specifically, the persistant stubbornness of the long-end of the yield curve to remain low. This is not a particularly curious choice, as it has been well established that the flat/inverted yield curve has been very troublesome to the Federal Reserve. On 1/31/05 I made a post titled “Greenspan’s ‘Conundrum’”. In the post I state why the yield curve is flat and why it will remain flat for some time. Rather than regurgitating old data, click on this link to read the post.
Bernanke gave three possible reasons why the yield curve has been so darn unruly.
1) The investing public is confident in the Fed’s ability to keep inflation in check. (Hah!)
2) The propensity of investors, specifically Pension funds, to invest in bonds in spite of their incredibly low yields. (He said the first part of this statement, I attached the second.)
3) The Global Savings Glut.
My previous post deals with Reason #3, which is the only legitimate reason among the three. Feel free to check it out.
