New Head of the Fed Nomination

Yesterday, Bush announced his nomination of Ben Bernanke for the new head of the Fed. This has to be confirmed by the Senate.

This is the way Ben thinks:

"Remarks by Governor Ben S. Bernanke
Before the National Economists Club, Washington, D.C.
November 21, 2002

Deflation: Making Sure "It" Doesn't Happen Here

… What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation…."

It would not look good if the USD takes a dive after the the announcement, particularly since it was already taking a dive that morning. So probably the Exchange Stabilization Fund engineered a "Welcome Bernanke Stabilization Rally". after the announcement which can be seen on this .pdf chart.

The Dow and NASDAQ probably got engineered up a whopping 170 and 33 respectively. It would not look good for the US equity markets to be taking dives on the day of the announcement. It is not as though there was any good economic news announced yesterday to rocket the DOW and NASDAQ up.