Fed May 'Twist' Balance Sheet to Promote Recovery

With divided leadership, the Fed has few tools left to stimulate the economy.

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[Read about the economic battles awaiting Congress this fall.]

The Fed is considering these policies to fulfill its dual mandate of maintaining price stability and maximal employment, but in the end, says Lekas, the free market might be the only entity that can truly sort out the United States' massive economic woes. "What you're going to see is continued price deterioration until you get to a point where you get buyers in the housing market and things begin to stabilize naturally, not artificially," he says. This could mean slogging through yet more economic pain, such as lower housing prices and continued high unemployment, but until Washington finds, agrees upon, and executes a policy that helps speed along recovery—in this political climate, an impossibly lofty goal—it seems that this rough road might be the only way out of the current economic doldrums.

  • Read an analysis of Ben Bernanke's remarks at Jackson Hole last month.
  • See why infrastructure might help the nation's jobs situation.
  • Check out  our cartoons on the federal budget and deficit.