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MONDAY, NOVEMBER 23, 2009
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 ANALYSIS 
4

Fed Nearly Exhausts Options

With rates at 0%, politically unsavory buying program only tool left

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(Newser) – The Fed is almost sure to leave the federal funds rate alone today, mostly because, at about 0%, it literally can’t go any lower. So with deflation still looming, what’s Ben Bernanke to do? One Goldman Sachs analyst says the Fed needs to shave the equivalent of 8 more points off the target rate by 2010. Since Bernanke can’t cut, the analyst suggests a shopping spree, the Wall Street Journal reports.

Buying private-sector assets is one way to pump cash into the system. But to have that 8-point impact, the Fed would have to spend a whopping $10 trillion—a prospect unlikely to fly in Washington. Walking the knife's edge between inflation and deflation, Bernanke will probably do the next best thing: cross his fingers, and pray he’s already done enough.

Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, Wednesday, Feb. 25, 2009, before the House Financial Services Committee.
Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, Wednesday, Feb. 25, 2009, before the House Financial Services Committee.   (AP Photo/Lawrence Jackson)
Federal Reserve Chairman Ben Bernanke speaks about reforming the US bank regulatory system in light of the global financial crisis, March 10, 2009, at the Council on Foreign Relations.
Federal Reserve Chairman Ben Bernanke speaks about reforming the US bank regulatory system in light of the global financial crisis, March 10, 2009, at the Council on Foreign Relations.   (AP Photo/J. Scott Applewhite)
In this March 3, 2009 file photo, Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, before the Senate Budget Committee.
In this March 3, 2009 file photo, Federal Reserve Chairman Ben Bernanke testifies on Capitol Hill in Washington, before the Senate Budget Committee.   (AP Photo/Susan Walsh, File)
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4 comments
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Snowleopard
Mar 18, 09 1:16 PM CDT
is this the only way we really have to inject money into the economy? Can't we somehow do it from the bottom up instead of this trickle down approach? The people who need it are the working class, and the Feds typical approach of just lending money to banks just results in more debt. If we got it directly to the working class instead in the form of public works projects, them maybe people could start paying of their mortgages and debt, and that could get the banks healthy again. Reply
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airron14
Mar 18, 09 2:29 PM CDT
No! Now stop spewing populous BS and educate yourself on the situation.
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Snowleopard
Mar 19, 09 1:40 PM CDT
populism = what works best for the collective as opposed to just the elite.
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Snowleopard
Mar 19, 09 2:09 PM CDT
I would like to hear a conservative refute what I'm saying, while also explaining why middle class wages dropped throughout the Bush years despite the fact that GDP was growing. ...I guess "No!" is as intelligent a response as you can expect from some of the people on here though.
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