It's true that the Federal Reserve and world-wide central banks are out of options: tightening money would cause widespread insolvency, but further easing is impossible (we already have 0% rates, the loosest monetary policy possible, and commodity prices are too high).
Don't mistake the central bank's end game for the nation's. Yes, the central banks have exhausted the magic of “monetary policy” and will soon become irrelevant. But they are just one part of the economy, and almost exclusively represent the interests of large banks.
I think that reasonable solutions exist. The problem is not that it's unwinnable; the problem is that it's unwinnable while preserving the wealth of the financial sector. Get past the idea of preserving banks at all costs, and suddenly it's a different picture.
The financial industry lobby and their representatives in government (Paulson, Geithner, etc.) make sure that every action benefits the banks, and not necessarily the average citizen. This happens in America, Europe, Canada and Australia.
If governments weren't so focused on preserving the wealth of the financial sector, we could be on the road to recovery. Instead, all “solutions” so far have directly assisted bank executives and highly paid financial employees at the expense of the general public and future taxpayers.
The primary imbalance is between the financial industry (which now hoards the cumulative wealth of the last 50 years) and the rest of the productive economy – which has been starved into desolation. Correcting this imbalance is as simple as ending the artificial support (bailouts & too-big-to-fail) for the reckless financial industry.
- Perpetual Bull