Bernanke may choose to expand the Fed’s portfolio (money printing) but the problem is well known: the banking system represents a bottleneck, preventing cash from getting from the Fed into the real economy, quote-unquote.
So the question is: Should Bernanke need to, how can he circumvent the banks?
Well the most radical proposal probably comes from James Altucher, who suggests direct buying of equities, which would definitely put cash into investors’ pockets, but has a snowball’s chance in hell of happening.
The new talk centres around non-bank financial institutions.
Ambrose Evans-Pritchard suggested in his recent column that the Fed start buying up assets from pension funds and insurance companies.
Bernie McSherry, the NYSE floor trader who frequently pops up on CNBC says the exact same thing in his latest note.
We suspect that Fed purists will cry bloody murder if Bernanke tries to do this, but as we’ve argued, unconventional policies are needlessly controversial — or at least, not as controversial as they’re made out to be. A system of fiat money lends itself to policy creativity (it’s why people think a gold standard keeps a government honest), and to pretend that we’re limited by some bound (as if we were on gold) is silly.