What More Can the Federal Reserve Do to Avoid Double Dip Recession?

In 2008 the American economy tumbled into a horrific mess that was the subprime mortgage fallout. The credit crisis caused the entire stock market to lose as much as 20% in one week on multiple occasions. The housing market plunged on a consistent basis. Investors faith in the system was shaken, and the economy was thrown into a deep recession.

Ben Bernanke and the rest of the Federal Reserve moved to lower the federal funds rate consistently, eventually dropping it to virtually 0%. As we enter the latter stages of 2010, interest rates are still sitting at 0%. The economy has crept slowly out of the worst recession in dozens of years, but recent economic numbers are leading some to think that a double dip recession is a very real possibility.

Over the last few weeks there have been increasing calls from all over the investment community for Ben Bernanke and the Federal Reserve to stimulate this economy once again to avoid that possible double dip recession. Many believe instituting purchase programs such as they have done in the bond market is a great move that must continue.

The problem that some people are failing to see here is that the Federal Reserve has been using every single bullet in their gun on this economy. Ben Bernanke and the entire committee have clearly responded to the economic crisis, but this is not a situation that can be fixed simply by intervention from the Federal Reserve. The problem is systemic and must be addressed in a much broader way than simply calling for the Federal Reserve to pump more money into the system.

As a financial professional I understand that people are looking for a fix that will occur quickly, but I really think the Federal Reserve has done what they can to help this economy. New economic policies and measures to restore investors shaken faith in the stock market as a whole are probably a much better idea at this point than simply having the Federal Reserve artificially prop up specific parts of the economy for a short period of time.

It's unclear at this point whether a double dip recession will occur or not, but looking to the Federal Reserve for a fix is really not addressing the long-term problems in our economy. It is time for investors, economists, and politicians to all realize that there are some serious fundamental problems that must be addressed!