The Federal Reserve’s statementon why it’s not tapering Quantative Easing round III notes that “fiscal policy is restraining economic growth.” But Fed Chairman Ben Bernanke just went a step beyond that in his oral remarks, noting that fiscal policy is “restraining growth and a source of downside risk.”
In other words: Sen. Ted Cruz (R) and the Heritage Foundation are trying to get Congress to shut down the government or breach the debt limit. If that happens, it will be very bad for the economy. The Fed needs to keep buying lots of bonds to offset the mischief they might make.
The story of the last five years continues: Fiscal policymakers screw everything up, and the monetary policy authority is the only thing that works. For a guy who’s basically been singlehandedly been keeping the U.S. out of recession, people sure give Ben Bernanke a lot of crap.
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