Comments on: Ben “I’ve-Still-Got-Bullets” Bernanke Speaks!

By: Jared Bernstein

Jared Bernstein — Sun, 02 Sep 2012 00:46:14 +0000

I’m afraid we can’t count on the Congress to step up and implement the necessary fiscal policy we very much need right now to complement what the Fed is trying to do. At the very least, we need Congress to resolve the fiscal cliff, but that’s just in the do-no-harm category. To help, they should implement some jobs measures, like modernizing/repairing our public school stock and helping stem the loss of state/local workers.

But they’re deeply enmeshed in gridlock and I don’t see how that changes anytime soon.

By: Kirk Snyder

Kirk Snyder — Sat, 01 Sep 2012 12:40:28 +0000

I wonder if you could comment on another theory. The FED has bullets left, but very few. There are some very serious threats on the horizon, namely a deepening European crisis, fiscal cliff here, slowdown in China, threat of mid-east war, etc. Right now the FED gets a *very* slight benefit by just announcing that it has bullets left and is saving the actual use of those bullets in case things get even more dire.

Do you think if things get even more dire Congress will finally take more action? I wish I were more convinced of that. I’m personally glad the FED is keeping some actions in reserve.

By: davesnyd

davesnyd — Fri, 31 Aug 2012 19:53:25 +0000

So can you help us understand more of what this means long term?

If I understand correctly, one of the “unconventional means” is buying of treasury bonds– which the right derides as printing money.

The argument why it isn’t problematic is because we’re in a liquidity trap so expanding the monetary supply doesn’t cause inflation. OK, I get that.

But what happens when the economy returns to something approximating full capacity? Does this cause “extra dollars” to be in circulation which, in turn, then cause inflation? Is there a non-painful way to unwind that so that it isn’t a problem?