Bruce Bartlett writes that there is little the Fed or the Treasury can do to winnow down unemployment in the face of congressional intransigence on additional
“„[T]hose who advocate a monetary helicopter-drop of money to stimulate growth concede that the Fed doesn’t have the capacity to do it without some action by Treasury to distribute the funds, which would be fiscal in nature. It would also require congressional action that is very unlikely in the current political environment.
“„That basically leaves two things that the Fed can do: buy longer term securities and buy very unconventional assets such foreign currency denominated bonds. The first it has already done some of without doing much to get money circulating. The second would put the Fed at war with the Treasury, which jealously guards its dominion over exchange rate policy.
“„[Treasury Secretary] Timothy Geithner has already received appropriations to buy printer paper and toner cartridges for the Treasury Department. If [Federal Reserve Chairman] Ben Bernanke is inclined to play along, there’s no bar stopping Geithner from literally firing up his word processor program and printing out pieces of paper that say “Take this to Ben Bernanke and he’ll give you $10,000.” [...]
“„But the larger point I would make is that focusing on the precise microdynamics of Fed action is a mistake. What’s more important is how the Fed frames what it’s doing. If the Fed says it’s determined to push the price level up, and will keep trying things until it gets up to such-and-such a point then that will probably work.