Why so much is read into the words of the Fed chairman.  Occupy
LA activists march against the Fed in November. Credit: Getty
Following Fed chairman Ben Bernanke's speech yesterday, the
usual bout of trying to understand quite how much we can read in
to his words has begun. Yet unlike the normally perjorative
"Kremlinology" – attempting to infer things from the most
minuscule turns of phrase – this Bernankeology is understandable
and quite useful.  Central bankers have a strange job. They
don't actually have many tools at their disposal; largely just
the tripartite decision to raise, lower, or maintain interest
rates. Yet many of the outcomes they create come, not from
actually using this power, but from creating expectations as to
their future use.  Suppose Bernanke knows he is likely to raise
interest rates in the first quarter of 2013. Even though his
actual power is relatively limited, he can create a wide
spectrum of outcomes depending on how he announces this. The
market reaction will be extremely diff