Is the Fed out of bullets?
Nah. As Mike O’Rourke of BTIG pointed out in his Thursday-night note, the only limit to the number of bullets is Bernanke’s imagination.
So to help him, we’re going to suggest various ways the Fed could stimulate the economy right now.
This has been suggested by James Altucher. His basic notion: it's no different than normal quantitative easing, except that instead of benefiting holders of fixed income (primarily Wall Street), it'd help equity holders, which also includes Min Street.
Merely buying up mortgages hasn't been enough to stimulate the housing market. But you know what would guarantee housing prices go up? Buying homes directly.
Think the economy is sputtering because of Fed uncertainty? Well, then Bernanke needs to make it ABSOLUTELY CERTAIN he's in no rush to raise rates. Make it clear that 'extended period' refers to a really, really, really extended period, like, say 10 years.
Why should only banks have the right to borrow money from the Fed?
Small businesses are dying for loans, and the banks won't lend to them. So, the Fed should just start making the loans directly, bypassing the intransigent middle men.
The idea of negative interest rates, to make spending undesirable, is an interesting one, but it could punish the wrong folks. So why not just do this for companies above a certain threshold, like say, a market cap of $5 billion or higher?
Worried about widespread deflation? Just drive up the price of goods, like food.
The Fed lent plenty of money to US banks when it looked like the crisis might take down the US economy. But what about other too big to fail institutions? Like foreign governments.
We know that the ECB is too timid to do it straight up, so let's just lend to Greece, Hungary, and Spain to relieve any doubt that a European contagion will take us down.
Forget mortgages, let's get the Fed aggressively involved in all manner of consumer loans.