Fed Chair Bernanke looked like a deer in the headlights y'day as he spoke to the Atlanta Fed. He was either suffering from a severe case of gas, or he was lying through his teeth. Terrible poker player. (still looking for video)
His suggestion of an increase in the TAF auction coupled with comments about the financial mkts being far from normal indicate that there is more pain to come. Expect rates to remain low for a while-even if inflation kicks up. Fed can always stop inflation-crank up rates, but stopping a Japanese style deflation is much more difficult. So far devaluing the USD and making money free is delaying the process. Time will tell if this strategy works. The US financials remain on life support. More equity raising coming from both Freddie and Fannie. Citi will be back as will MER and LEH.
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