Bernanke Could Do More To Help Economy, But Hasn’t Bothered

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Gradualism may end up being the failing global economy’s worst enemy. Many analysts don’t think that the Paulson plan’s $700 billion war chest was enough. Obama’s economic team may have to go back to Congress for more.

The Fed has cut rates, but why hasn’t it cut them faster? The same question can be asked of any major central bank in the world. China only announced its huge stimulus package two weeks ago. There have been signs of a slowing in that country for months. Today, the Chinese government admitted that the drop-off in production within the country was unprecedented.

Ben Bernanke says he has more ammo to use to combat the US slowdown. It is a little late for show-and-tell.

According to The Wall Street Journal, the head of the Federal Reserve said that the body could drop interest rates more. But, he added "Among the Fed’s options are direct purchases of Treasury and securities issued by government-sponsored enterprises "in substantial quantities" to affect yields, "thus helping to spur aggregate demand." It could also put more money into the commercial paper market.

The National Bureau of Economic Research today said the US recession is a year old. That is a year in which more could have been done. Rates could have been cut more aggressively. The government could have done more to support homeowners facing foreclosures. Treasury could have put money into banks sooner. The failures of Lehman and Bear Stearns were certainly warning signs.

Bernanke could be doing more. But, for the time being why not hold off and let the world burn?

Douglas A. McIntyre