What if Bernanke didn get it right?
All eyes may have been on the election yesterday, but today, many have been glued on Ben Bernanke. The Federal Reserve announced a dramatic effort to help jumpstart the economy by purchasing another $600 billion in long-term Treasury bonds through mid-2011, a monetary policy that goes by the fancy phrase “quantitative easing.” The number was higher than the $500 billion economists estimated. The Fed’s move could be successful, boosting employment through easing lending. But it could also do too much, producing too much inflation or more of the sort of bubbles that got us into this downturn in the first place; or too little–banks are already sitting on more than $1 trillion in reserves and aren’t lending enough as it is. If that happens, it could make it look like the Fed is “out of bullets,” as the Post’s Neil Irwin wrote Monday. In other words, if the Fed’s move fails, Bernanke could find himself in a precarious position: he could be in danger of looking like he’s running out of opti