There are many tools in the Fed economic tools kit for Bernanke to fix 'stuff' with.
It looks as though he'll be pulling lots gadgets out and trying miracles at every turn.
There is a view around the Fed that to lift interest rates all you need is a burst of inflation.
Better to have inflation going up than down. So now the Fed is in a state of two minds. Creating a massive wave of credit pushing indexes up as prices take off then monetary policy to even the run. Well they're talking about it.
Then maybe a recreation of the good olde days pre '07. Stir up the stock market by buying stocks (another form of monetisation) or get into real estate speculation and/or financing.
Seems far fetched doesn't it? It is in the power of the Fed to do the above and importantly the Fed will do whatever it takes to prevent deflation and a double dip.
Anything.
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