In his last speech, Bernanke was recorded as follows:
And "if people feel that their financial situation is better because their 401(k) looks better or for whatever reason - their house is worth more - they're more willing to go out and spend," Chairman Ben Bernanke told reporters. "That's going to provide the demand that firms need in order to be willing to hire and to invest."
Read more: Cherokee Tribune - Fed seeks 'wealth effect'
I couldn't believe it when I read it. Even a child can see Bernanke's reasoning is not valid to decrease the unemployment rate. The big majority of the people that are jobless do not own a house or stocks. So there won't be anything to feel good about for them if (and that's a very big IF) home prices and stocks would rise. On the contrary, they would fall more behind. They would go out less and spend less.