At a speech today in Austin, TX, Federal Reserve Chairman, Ben Bernanke said, "Although further reductions...are certainly feasible, at this point the scope for using conventional interest rate policies to support the economy is obviously limited."
In other words, monetary policy which the government has been relying upon to stimulate the economy and housing market is not going to be enough - which is something that I have been talking about for a while.
This is not an interest rate, mortgage rate, or money supply problem. And while I would rather have lower interest rates, mortgage rates, and more money available for investment - it is not going to solve this economic crisis.
In fact you could argue that monetary policy is doing very little to stem the crisis based on the events of the past few months. And while I agree that economic conditions would be more deteriorated had the Fed not opened up their lending window to financial institutions and more recently the commercial paper market, the current environment is about as predisposed to economic growth as Citigroup is to extending credit to the American consumer and business owner - it's not going to happen.
What Bernanke is saying without saying "it" is that the Wizards of Washington need to propose highly targeted and aggressive fiscal policy in order to support and stimulate the economy before the economy continues to contract even further.
www.ItsTheHousingMarketStupid.com
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