When the S&P collapsed and bond yields headed way down over the past two month I read it as a financial market misreading Washington and panicking. I thought: the financial markets have noticed that Washington is dysfunctional; thus they now fear that nobody in Washington is going to do anything to restore nominal spending to its appropriate track.
And I thought: they are probably wrong; in response to this people will react, and then we will find the S&P 500 bouncing a good chunk of the way back to 1350.
After Bernanke's speech, it is clear that I was wrong. The S&P is not going to bounce back. Nobody is offering anything for the economy.
The Lesser Depression drags on...