If You Really Think Bernanke Will Run Out Of Bullets, You Need To Wake Up#comments
Has the market forgotten the alphabet soup of programs created by the Fed led by this Chairman 18-24 months ago? The Europeans have not forgot them, they are the foundation for the ECB’s 2010 playbook. Here in the U.S., almost all of the emergency measures have been wound down. Some worked, some did not work. The point is the only thing that limits the Federal Reserve’s options is Ben Bernanke’s imagination.
Really though, what are the options?
- Reduce the interest rate of 0.25% on excess reserves hoping that commercial banks will start lending captial
- Jawboning… not really sure how that would work – point an AK47 to the bank CEOs
- Buy treasuries and bonds to target interest rates further into the curve i.e. fix interest rates for terms longer than 3 months…
- Buy more assets junk a la ABS, MBS, CDOs, etc
The Federal reserve might be doing a great job at increasing the supply of credit BUT how would it stimulate consumer and business demand for credit? Clearly low interest rates are not enough!