FedSpeak - Humphrey-Hawkins - The Market Ticker

I know, it's not called Humprey-Hawkins any more.  Call me old-fashioned.

Here's my view on Bernanke's comments - Bernanke's comments are in italics and indented, mine are plain text:

Chairman Frank, Ranking Member Bachus, and other members of the Committee, I am pleased to present the Federal Reserve's semiannual Monetary Policy Report to the Congress. I will begin today with some comments on the outlook for the economy and for monetary policy, then touch briefly on several other important issues.

The Economic Outlook
Although the recession officially began more than two years ago, U.S. economic activity contracted particularly sharply following the intensification of the global financial crisis in the fall of 2008.

We created a mess with more than 20 years of intentional pumping of risk assets and an ever-present lowering of the Federal Funds Rate on an average basis.  We held that rate intentionally low through the provision of excess liquidity so as to cause credit growth beyond the growth rate of the economy.  This is, as I have said before, a direct violation of The Fed's primary mandate, which is not to "manage interest rates" but rather to match long-term credit aggregates to growth so that growth potential is maximized without creating dangerous inflationary pressures.

Instead, we allowed those pressures to run rampant, but in active conspiracy with Congress and the BLS, we hid the effects.  Specifically, CPI-U does not include actual home prices but rather "Owner's Equivalent Rent" which is cleverly constructed so that lower interest coverage costs result in a false deflationary contribution.  This, along with other intentional distortions, allowed us to hide the hyperinflation in home prices that we intentionally caused.

via market-ticker.denninger.net