Ben Bernanke's pledge this week that the Fed is ready, willing and able to do more helped give stocks a lift and spurred a big rally into gold and silver.
But the financial markets are not the economy and James Galbraith, author and University of Texas Professor, is not convinced the Fed can really do more to stimulate the economy.
"The Fed reached the effective limits of what monetary policy can do quite a long time ago," he says. "These quantitative easing measures were always illusory in far as anyone thought they could actually be an effective source of economic recovery."
Rather than more monetary stimulus (a.k.a. QE3), Galbraith maintains a longstanding view that the U.S. economy needs more fiscal stimulus, i.e. more spending by Uncle Sam on infrastructure and green energy projects that create jobs today and have long-term benefits. (See: We Need a Second Stimulus Immediately, Says James Galbraith)
In addition, the professor recommends President Obama do something "bold" like lowering the retirement age, a seemingly radical plan Galbraith says will address the problems of both high unemployment among younger Americans and older Americans working longer and harder to make ends meet. (See: James Galbraith's Radical Plan to Create Jobs: LOWER the Retirement Age)
Of course, lowering the retirement age and increasing federal spending on just about anything runs afoul of the current political climate, where the debate is over how much spending should be cut and whether taxes should be raised or not.
But Washington politicians have it "totally wrong," according to Galbraith who believes austerity measures amount to "a wanton piece of cruelty" on lower income Americans. Furthermore, he argues America's long-term deficit problems are "completely disconnected" from current U.S. borrowing costs, which he notes remain relatively (and historically) low.
"My view is we're in a tragic moment where public policy is doing real harm on a pretense of accomplishing something that's absolutely not going to be accomplished," Galbraith says.