Ben Bernanke will testify in front of Congress today on matters related to the economy for his Semi-annual Monetary Policy Report.
From Republican Congressmen, you can expect a lot of questioning about taxes, the deficit, the size of the Fed’s balance sheet, and other key talking points.
Democrats who favour more stimulus may wonder what more the Congress and Bernanke can do to stimulate the economy.
There’s definitely been loud chatter lately about the possibility of more easing.
Mr. Bernanke says he believes that there are situations that could justify new measures on top of what the Fed has done so far: keeping short-term interest rates to near-record lows and amassing a portfolio of government bonds and mortgage-backed securities, which has put downward pressure on long-term rates.
But to take new action, Mr. Bernanke and other Fed officials would have to be convinced that the economy was moving onto a perilous path of deflation, or that the recovery was so painfully sluggish that it lacked enough momentum to generate private sector job growth.
But of course the question is: what could Bernanke actually do?
It’s not obvious. Buying more mortgages may help at the margins, but mortgages are already incredibly cheap and housing still seems to be on the way down. It’s the lack of obvious solutions that’s prompted folks like James Altucher to throw out direct equity market intervention, a form of quantitative easing that would get money directly into the hands of investors.
Or what about, perhaps, simply buying real stuff in the economy to lift prices?
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