Fed, Congress out of options to stimulate U.S. economy

Last week, Federal Reserve Chairman Ben Bernanke spoke of a slowing world economy at the annual fete of world economists in Jackson Hole, Wyo.

His speech was characterized by the typically measured prose of someone whose choice of adverbs has the capacity to send markets diving. However, to an experienced listener, two interesting tidbits emerged.

The first should be familiar to readers of this column, to wit a recognition that the world economy is slowing. This admission is important because a slowing world economy, as opposed to slower growth in, say, Europe, suggests increased risk of a recession here at home.

I have said since May that a U.S. recession is nearly certain, and Bernanke’s remarks suggest that more economic models are saying the same thing.

The second important deduction from Bernanke’s speech is that he believes quantitative easing, a tool that has been used twice before, might soon be deployed again to boost the economy. He explained that previous bouts of quantitative easing had been successful when weighing the balance of evidence.

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