I guess I don’t see how anyone can think that Ben Bernanke is stating that he and the Federal Reserve have done all they can do to try to stimulate the economy, when the Chairman himself tells us that the September policy meeting will be a longer one in order to allow for the Federal Reserve Board to consider a wider range of options in seeking to stimulate the economy through monetary expansion. Perhaps the longer meeting is needed for Bernanke to convince inflation hawks that the economy could stand more expansion, but in any event, Bernanke should not be seen as announcing today that the Federal Reserve has run out of bullets; a conclusion that I see Justin Wolfers shares.
This does not say that Bernanke might not want Congress and the Administration to do more to stimulate the economy as well, of course. But calling on Congress and the Administration to do more, while essentially stating that we will have a QE3 (or a QE4, if one counts the announcement a few weeks back that the Federal Reserve will keep interest rates low until mid-2013 as a quantitative easing move in and of itself) within short order. And for the record, I think that the conditions justify another round of quantitative easing, and that the economy can stand some inflation in the short term in order to get rid of debt overhang; the latter position having been put forth by Ken Rogoff.
IMMEDIATE UPDATE: If the Fed does indeed take action, will Paul Krugman admit that this column was off base? One can hope, I guess, but given that Paul Krugman seems to believe he is right about everything, I am guessing that no such admission will be in the offing, no matter what the circumstances.