Ben Benanke joined a line of politicians from both sides of the aisle in suggesting massive infusions of capital and incentives to save the US economy. The total value of these is pegged as high as $150 billion.
The Fed chief said that he could see these packages helping the economy regain its footing in 2009.
Perhaps the reason the market did not rally on Bernanke’s comments is that investors are worried about the "lost year" of 2008. Between now and the beginning of next year, bleeding in certain sectors like housing, auto, and retail could wipe out hundreds of thousands of jobs. Businesses that close over that period will probably not re-open. People who lose their houses by the hundreds of thousand will not get them back.
The trouble with all of this is that a $150 billion package of caffeine may be much too little if the hole that gets dug over the next four quarters is deeper and wider than Washington and the Fed can imagine, or at least admit imagining. If a slowdown turns into a deep recession, it could last for two years or more.
Tax cuts won’t help people without jobs. Lower mortgage rates won’t aid the homeless. A stimulation package will not bring back industries which are on the brink of disaster.
If the Federal government wants to do something, it will have to be much more dramatic than debating an aide package and putting it to a vote. A cut of one full point by the Fed would be a nice start,
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