Job market, other indicators weak — double dip recession on the horizon?

Looks like not if the Fed can help it. This is likely to be a week full of not so good economic news, and if that scenario comes to pass there’ll be a lot of talk about a “double dip” recession.  And make no mistake, the talk will be justified. I’m not sure what fiscal tools Bernanke has left in the box, but there seems to be agreement that he’ll go more chainsaw and less scalpel to avoid a double-dipper. I guess we’ll see …

From the link:

With little support in Congress for a renewed burst of government spending, the burden of rescuing a lagging recovery falls upon the nation’s central bank. The Fed already has kept its benchmark lending rate near zero for almost two years, and has tried to further loosen credit via unusual asset purchases, known as “quantitative easing.” In a speech Friday, Bernanke said the Fed would take additional “unconventional measures if it proves necessary, especially if the outlook were to deteriorate significantly.”

He told an audience of central bankers in Jackson Hole, Wyo., that the Fed could spur growth by:

•Expanding its $2 trillion balance sheet with additional purchases of long-term securities.

•Announcing plans to keep its benchmark interest rate near zero for “a longer period than is currently priced into the markets.”

•Or reducing the minuscule interest banks earn on deposits with the central bank.

Bernanke said the Fed must balance the benefits of employing unconventional monetary policy tools against their costs. Overly aggressive action could raise doubts that the Fed would be able to unwind its extraordinary assistance once the economy recovers.