Fed can't fix the economy this time, but will it try?

Fed Chairman Ben Bernanke could announce a new policy for action to help the economy. Would the Fed come across as desperate and ineffective, or would it boost American confidence?

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    US Federal Reserve Chairman Ben Bernanke testifies before the Senate Banking, Housing and Urban Affairs Committee hearing on Enhanced Oversight After the Financial Crisis: The Wall Street Reform Act at One Year on Capitol Hill in Washington, July 21, 2011. Will the Fed be able to put the American people at ease during a volatile market performance?
    Yuri Gripas / Reuters / File
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As most business and finance media onlookers gear up for another dose of Fed speak tomorrow with particular interest in the Feds response to the current debt downgrade, now might be a good time to weigh the potential that Bernanke’s Fed might craft policy language that effectively conveys a sense of their ineffectiveness resulting in a loss of credibility and confidence.

Given the fact that the Fed has pulled out all the stops over the last few years implementing QE1 and QE2 as well as a vast series of extraordinary measures (principal repayment treasury purchase program, discount window lending, commercial paper lending facility, etc. etc.) , it would seem that any additional unconventional policy action geared toward propping the flagging economy or mitigating the debt downgrade may start to look desperate and futile.

Will the Fed push policy action one step too far?

Are we on the verge of a Japanese-style moment whereby the majority of participants clearly recognize that the problems we face are bigger than the Fed and its cockamamie policy tools?

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