While describing the four "possible actions" the Fed could use to bolster the economy at Jackson Hole yesterday, Ben Bernanke, in essence, said that monetary policy has taken us as far as it can. Even if there was agreement on the Fed's Board — and there isn't — there's really nothing left for the Fed to do.
That leaves Congress — and that means nothing will be done. Political gridlock, which probably will become even worse after the November elections, means there will be no meaningful fiscal policy either. I find it hard to believe the Republicans will be able to take control of both the House and the Senate, so that will let them off the hook for accomplishing anything at all — and I suspect they'll be content to let unemployment remain high for another two years so they can take the White House in 2012.
In the meanwhile, the rest of us can sit around and listen to Obama and Geithner tell us our economy is in "recovery." Well, it doesn't look like a recovery, and it doesn't feel like a recovery, no matter that GDP may be expanding at a glacially slow rate. In the meanwhile, the gap between the rich and the rest of us just continues to grow — the same gap that encouraged workers with stagnant incomes to create the staggering levels of debt that set off the crisis in the first place.
A word of optimism? From me? Surely you jest.