This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

It's Crawl, Stagger, Crawl Along Recovery Path

With every Federal Reserve speech, every Open Market Committee meeting minute release or every other public pronouncement from Chairman Ben S. Bernanke, the market seems to be holding its breath and holding out hope that the central bank will arrive on the scene with news of a flattering recovery.

Whether it is through additional quantitative easing or some new, innovative measure, there's an assumption that the Fed still holds the keys to the pace of the recovery. Unfortunately, these assumptions are increasingly misplaced and deny the reality that the Fed is increasingly limited in additional corrective measures. The real holder of the keys to this recovery sits at another address in Washington, D.C., with fiscal policymakers. So while Fed pronouncements make good media headlines, our time and attention may be better spent on the opposing ends of Pennsylvania Avenue.

As the economy moves into the fourth quarter, the optimism from the beginning of the year seems tempered, if not a distant memory. The structural issues affecting the recovery are all too real. Considering the magnitude of the housing problems and the long-term rebalancing in consumer balance sheets, we are likely to continue to experience the "crawl, stagger, crawl" of the past few quarters, moving into next year.

Against this backdrop, the primary question is what else can (or should) the Fed do to accelerate growth and facilitate the rebalancing?

More quantitative easing to lower rates further? That won't have much impact given tepid loan demand.

Officially cutting short-term rates to zero? It's not clear what good that would do.

Changes in reserve requirements for banks? There is more than sufficient liquidity, and banks are gradually improving their balance sheets. Legitimately, there are market expectations to be managed, but any lift on this front is likely to be short-lived.

Perhaps more challenging is the fact that anything the Fed does could be wiped out without some clear direction and action on the fiscal policy front. Pending tax increases, higher regulatory burdens and state and local corrective actions loom large and will have a significant impact on the recovery. On the tax front, the underlying trends are very troubling. Higher income, capital gains and estate taxes will place an additionally significant burden on one of the most fragile recoveries in modern history and potentially restrain growth over an extended period of time.

So while the media and the markets gear up for the next morsel from the Federal Reserve, the more appropriate focus should shift more heavily to the fiscal policy debate where one would hope some logic and common sense prevails.

Without some fiscal policy prudence, the Fed will find its tool chest further compromised and continue to scramble for some magic elixir to cure our economic woes.

>To submit a news tip, email: tips@thestreet.com.

RELATED STORIES:



Follow TheStreet.com on Twitter and become a fan on Facebook.

Paul Ballew is senior vice president of customer insights and analytics at Nationwide Mutual Insurance in Columbus, Ohio. Ballew previously served as a Fed economist, a partner for J.D. Power and a senior executive at General Motors.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,113.54 +61.81 0.36%
S&P 500 1,983.53 +9.90 0.50%
NASDAQ 4,456.0160 +31.3120 0.71%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs