Wednesday, June 20, 2012

Last Call

Felix Salmon dissects why Helicopter Ben is continuing Operation Twist to keep interest rates and inflation low rather than going for quantitative easing from the Magic Printing Press.

From today’s presser, my feeling is that Bernanke maybe doesn’t feel as strongly any more that he would be reckless to act more aggressively. But he does still feel that the upside from doing so is “doubtful”. If he’s forced by crisis to pull out the ammo, he’ll do so. But Bernanke clearly doesn’t consider the unemployment crisis to be a crisis in that sense. If something happens suddenly, then policymakers can act strongly and decisively. Years of high unemployment are in many ways more damaging than the sudden drop in government spending that risks arriving with the fiscal cliff. But because the damange is slow-acting and invidious, it seems that unemployment, on its own, is incapable of persuading Bernanke to do more.

My question is what will it take to get Helicopter Ben to hit the big red button, a full-blown European meltdown?  Because that's where we're headed.

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