A recent speech by Chairman of the Fed Ben Bernanke calls for an even larger stimulus package to give the U.S. economy a much-needed boost. A CNN Money report details Bernanke's continued support of the planned purchase of $600 billion in treasury bonds by the Federal Reserve. He sticks by his belief of conventional monetary policy despite criticism from outside economies.
At the same time, Bernanke is also calling for other countries to let their currency gain in value to help correct the imbalances of the slowly recovering world economy. He believes part of the problem lies in emerging markets that are preventing currency appreciation. The rate at which emerging markets are recovering is much faster than the rate at which established economies are recovering, leading to an imbalance that is impeding political cooperation between countries. The unity and support that got the global economy through the worst of the economic crisis has diminished and "tensions among nations over economic policies have emerged and intensified," according to Bernanke. Is this true? Or are some countries maybe taking a backseat in the hopes that, following the trends of economics, the developing economies will slow down as the established economies speed up, eventually reaching equilibrium?
There is always a fairly significant lag between when monetary policy is implemented and when it takes effect on the economy. $600b is a substantial amount of quantitative easing for us. Not that we might actually go too far (we're too deep in the recession for that), but it is good to keep in mind that it will take a while for the effects to happen, so critics, be patient before demonizing the Fed.
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