“The Fed may be forced to take such ’hail Mary’ monetary measures because of the stalemate in Congress over any administration proposed additional fiscal stimulus policy”.
I think your comment is correct since the Fed has been doing everything else it can to encourage economic activity. They have kept interest rates low but without product demand in a greatly weakened consumer economy not many businesses can take advantage of the opportunity to increase either their capacity or inventories. There is no American consumer market at the moment. The Fed is hoping for the foreign market to buy cheap[er American goods via devaluation.
Just recently China has devalued the yen (once again) to encourage more of its products continuing in demand. Since all talks with China on this issue have failed, perhaps this is our “shot across the bow” that we intend to retaliate. I agree with your observation that this kind of “beggar your neighbor” retaliation policy could be disastrous, a la the 1930’s, but what are we to do? Congress is sitting on its hands either unwilling to give the administration a break or afraid to take bold action in fear of the angry, and largely misinformed, electorate. Misinformation is rampant. Since the current economic disaster benefits the Republican Party (with supreme irony!) they may want to keep the pain going until after the Mid-Terms and even until the 2012 Presidential election.
We need new jobs and, perhaps, a TARP program to reduce consumers troubled assets. The puny efforts to try and stem the tide of foreclosures has been a pitiful failure although the TARP program for the financial community has been an outstanding success. The stimulus was also inadequate to pull us out of the recession. Not another dime is possible.
We could get out of this mess if we really wanted to but those in charge believe our pain still has a lot of work to do for their longer term interests. Until they are ready to “play ball” again we will be in a “bankers recovery” with recession for everyone else. The additional, and tragic irony is that millions of the ones in pain are cheering for the continuing and unnecessary recession.
