As I noted a week ago, the Fed has effectively conceded that it is out of bullets. Via a speech yesterday afternoon in Cleveland and the Q&A session that followed, Fed Chairman Ben Bernanke reiterated the point more directly. Bernanke acknowledged that long-term unemployment is a “national crisis” and suggested that Congress should take further action to combat it. He argued that Congress could be especially helpful in the areas of long-term unemployment, budgetary discipline and housing policy. Bernanke then went on to offer both a sort of justification for what the Fed has done (or not done) to this point along with an admission that he’s out of ideas.
“The Federal Reserve has made enormous efforts to try to help this economy recover and stabilize” though its control of interest rates, or monetary policy, he said. “Monetary policy can do a lot, but monetary policy is not a panacea,” Bernanke said.