Political Economy: Zero Bound - by John Cranford
In the past few months, Bernanke has deployed the central bank’s powers in extraordinary and flexible ways to flood the banking system with cash. At latest count the Fed has created at least a half-dozen new lending programs for institutions that aren’t its traditional borrowers and broadened its lending to ordinary banks. The amount of credit outstanding from the Fed is well in excess of $500 billion. That’s billion, with a “b.” A year ago, it was $500 million, with an “m.”
The next year or two will be trying as the Fed navigates yet another expanse of uncharted water. Bernanke has proved adept so far at finding creative ways to use the Fed’s resources, and it’s safe to expect him to continue doing so. But the days of just moving interest rates up and down to steer the economy are long past.
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