The Federal Reserve and the European Central Bank announce a supranational quasi sovereign wealth fund.

Speaking from his now official apartment at the Philadelphia Mint Chairman Bernanke set out the rationale for the new supranational fund named “Interbank Cheer”, a near perfect anagram of its architects ‘Bernanke’ and ‘Trichet’.

“As I have said before when facing difficult times, there are two possible mistakes: one is to go on too long, and one is not to go on long enough. We’ve decided the first is preferable.

This new fund will invest in US mortgage backed securities and begins its operations respecting the spirit and letter of that strictest of market dictums: buy low. But that does not mean we cannot look forward to selling them dear at our leisure. As a very great man once said, 'I may not be here when we do, but we as a people will get there'. This is sound use of the public purse.

Let me address, too, some of the concern, misplaced in my view, about overlap with Fannie Mae and Freddie Mac. As I’ve said before capping the size of their portfolios helps control potential systemic risk. And that’s why we are slicing and dicing this completely different type of risk via a new entity. A new entity partially funded, I should add, by the sale of pre-1982 pennies which contain 95% copper worth nearly triple the face value of the coin itself. I thank, Alan, my predecessor for that. And the idea, too. True, most of them have already been smelted and shipped to China by our dynamic private sector but I don’t think we’ve completely missed the boat.

Finally, before handing over to the ECB President, let me add that a helpful side effect of the fund is that it will also stabilize prices across many asset classes. Which, of course, we don’t target. But it’s a definite nice to have in today’s context, isn’t it? You may recall my saying ‘if Wall Street crashes, does Main Street follow?’ The answer is still ‘not necessarily’. But why risk it?

Jean Claude?”

“Merci Ben. I too would quote a very great man: ‘When the seagulls follow the trawler, it is because they think sardines will be thrown into the sea’. Evidemment, we all know that excessive, volatile and disorderly movements are undesirable for economic growth. So is a dollar at levels making EU manufacturers, how do you say, brick it. Clarity, transparency and a logical approach are required to draw a line under the ongoing disorder.

This is the line; there will be no more sardines; and I remain vigilant.”


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