Bye-Bye, Bernanke… Hello Timmy?

Here's a challenge for you. First, blow up a balloon. Okay, now find a way to remove half the air without letting the balloon shrink at all. Can you do it? If so, you should apply to be the next Fed chairman – because that's exactly what he or she will need to figure out how to do for the economy. You know the story by now: in response to the US economic crisis of 2008, Federal Reserve Chairman Ben Bernanke inundated the US financial system with trillions of dollars, an unprecedented gambit designed to reflate a rapidly deflating economy. And you have to hand it to him: phase one of his plan worked well. Stocks are at all-time highs, housing has recovered, and virtually all asset prices are inflated. Phase two, which is fast approaching, will be the hard part. The Fed needs to siphon off some or all of the excess cash that it has injected into the system in the last five years without crashing the economy. One would assume that this near-impossible task – wh...

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