Obama, Democrats, Republicans AND Bernanke All in a Bind – What they will do and when

We have two distinct groups in D.C. that are stuck between a very big rock and a hard place. The first is the Federal Reserve. The second is the Democrats and Republicans and the battle being waged over the debt limit. I see a possible solution to these impasses. It’s so simple that I’m sure it is being considered. The prospect is scaring the crap out of me however.

The Fed is in a bind. The economy is clearly slowing down again. Unemployment will soon follow. According to the Fed’s Dual Mandate they should be doing something about that.

They have few options. They can’t do more Large Scale Asset Purchases (“LSAP”). What has become referred to as “QE”, has not worked. It was also very unpopular (both in and out of the country). LSAPs may come back sometime, but they are on the shelf for at least a year. What could the Fed do in the near future?

LINK