Bernanke Testifies Again...

Further cuts in the federal funds rate are on the way. Ben Bernanke is talking about how we are in a slow-moving financial crisis of DeLong Type II: one in which large financial institutions are insolvent--"pressure on bank balance sheets"--and in which lower short-term interest rates and a steeper yield curve are a way of providing institutions with the life jackets they need to paddle to shore.

Larry Meyers has pointed out that the BBB yield is no lower than it was in July--that all the easing has had no effect on the cost of capital that the financial markets feed to the "real economy," and hence that Fed policy today is no more stimulative than it was last summer.