Bernanke said one thing that struck me today-- there is plenty of cash sitting on the side. This contrasts with 1978, when there was none (that is why this economy is so much stronger than that economy, but that is a different subject.).
Some of that cash is waiting for the equity market, but that is not what he was talking about. He was talking about jobs. Jobs come from capital spending. Yes, a few come from consumerism, but how many people does, say, Dell (DELL) or Geico have to hire to accommodate an extra 10, even 20% sales? Very few. That is why we have the rule that 55% of new jobs come from small business. Rich and well invested old people give their friends and relatives cash, or take their own, and start new businesses with competitive ideas. Out of every 10, one will thrive, two will do well, and seven will liquidate. That one will create more capital than was spent on all ten -- and new jobs, real, lasting jobs.
The point Bernanke was making is that that capital is not being invested. Between 1978 and 1983, corporations never materially increased their hiring, and media types were stupefied in 83 when the economy was suddenly growing, uh, whole fields of durum wheat. That is because everyone quit waiting for Montgomery Wards or Eastern Airlines to hire them back to that comfortable, benefit-rich corporate job (um, an old, tough but edible potato patch) and started using their skills, energy and passion to create-- corn stalks with big fat sweet kernels. Elimination of capital gains taxes had created an entire new batch of farmers.
Here is the effect of stimulus on the solar installation industry: we are all busy, but we are not buying capital equipment, nor hiring. Small businesses are staying small to avoid the stifling regulations that come at 10, 50 and 100 employees; one of the relatively big, old installers in Austin has nine very busy employees and they aren't hiring. The president in 1980 strangled those regulators. Large companies which already have too many employees are getting all the big contracts, and not hiring either. Like Jesus said, "render unto Caesar what green shoots are his."
Another result of this is that services such as commercial insurance have contracted; the current Administration has promised, and is expected, to be friendly to lawyers and their suits (also known as greenshoot-acide). My commercial insurance was 37.5% more expensive than six months ago because fewer companies are offering coverage now. How many more marginal rows will not be hoed because of that expense?
The effect on that capital is just what Bernanke said-- it is on the side of the pasture. God bless you traders riding this rally; I put all my money in equity in late March, but I will bail when I hit 15%. When the market crashes this summer or next fall when the above-mentioned capital fails to enter the economy and create jobs, then I will buy again. But, there will be no recovery until that capital, and those jobs, get out of the barn and in the pasture.