Below is his answer to a question during a recent interview.
Ignore David Rosenberg's sound advice and cautious outlook at your own risk!
Economic news flow continues to be dismal. Far too many structural problems remain unresolved for analysts to extrapolate earnings based on the ongoing rebound in equity markets.
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Bernanke likes to remind everyone that he is an expert on the great depression and knows how to prevent it from happening again in the US. Apparently he is also an expert on Japan and its struggle with chronic deflation following its housing bubble in the 1980's. In fact Bernanke wrote an article in 2000 titled "Japanese Monetary Policy: A Case of Self-Induced Paralysis," where he goes on to lecture BOJ officials about what they could and should have done differently in order to to avoid a deflationary outcome. He goes on to postulate that the BOJ was not trying hard enough to stimulate the economy and that 0% interest rates are just one tool to beat deflation. The Fed Chairmen even goes so far as to assert that he knows how to escape a liquidity trap caused by 0% interest rates. The reason I bring this up is because it gives people a good idea of what Bernanke's next move may be. The US is dangerously close to falling into the dreaded "liquidity trap" as deflation takes hold and monetary policy loses its effectiveness.
Here are some of his suggestions to the BOJ:
http://blackswaninsights.blogspot.com/2010/08/bernanke-explains-how-to-escape.html
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