He talks and talks and yet …NOTHING!

Mr Bernanke argues that the roots of the current global economic downturn stem from global imbalances in trade and flows of capital in the late 1990s.

Mr Bernanke says the imbalances “reflect a chronic lack of saving relative to investment in the US and some other industrial countries, combined with an extraordinary increase in saving relative to investment in many emerging markets.”

As a result, saving flowed into developed economies for more than a decade, despite low interest rates, he argues.

Risk management systems in the private sector and government regulation then failed to “ensure that the inrush of capital was prudently invested,” he says.

Federal Reserve boss Ben Bernanke took a somewhat belated step toward restoring it in a speech on Tuesday. His diagnosis of the roots of the economic crisis – “too big to fail” banks, ad hoc financial infrastructure, pro-cyclical regulation, fractured oversight – makes sense.

And Bernanke focused on how to manage these firms through risk controls, liquidity requirements and capital standards, rather than how to wind them down – or whether to intervene to keep future Hank Greenbergs and Sandy Weills from assembling ungovernable monsters. He did, however, rightly call for a new resolution regime for failing institutions.

Reforming financial infrastructure during a period of unprecedented financial innovation is no mean feat. Despite this, Bernanke’s agenda in that area is probably too modest, focusing on tweaks to the plumbing – money fund, derivatives and repurchase market improvements – rather than more ambitious reform.

Lawmakers and regulators should consider added restrictions on assets that money funds can own and a new “limited system of insurance” to protect investors, Bernanke said yesterday in a speech yesterday urging broad changes to U.S. financial oversight.

The comments signal Bernanke favors less aggressive rules for money funds than those recommended by a group including Volcker, an adviser to President Barack Obama. The group proposes regulating money-market funds more like banks, with reserve requirements and mandatory federal insurance.

Money-market mutual funds have drawn scrutiny since the collapse of the $62.5 billion Reserve Primary Fund in September. The New York-based money fund was the first in 14 years to break the buck, or drop below $1 a share. Its collapse, caused by losses on debt issued by bankrupt Lehman Brothers Holdings Inc., rattled confidence in the money funds, long considered the safest investments after bank accounts and Treasury debt.

These learned people just keep pushing the liquidity point………all well and good but without demand liquidity means squat!