It is interesting to read that 2002 article that lists many “extreme” actions the Fed could hypothetically take, and for us to NOW check off those that the Fed has recently in fact taken. This speech certainly provides insight into the policy actions that Ben will favor as actions to try and control this recession/depression.
One could take from this speech that it is probably too early to start shorting the US Treasuries, because the Fed WILL use its printing press to buy its own Treasuries to force down yields (if it isn’t ALREADY doing that)
Here is a tasty excerpt:
Although a policy of intervening to affect the exchange value of the dollar is nowhere on the horizon today, it’s worth noting that there have been times when exchange rate policy has been an effective weapon against deflation. A striking example from U.S. history is Franklin Roosevelt’s 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation. The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt’s devaluation.
