Fed faces challenge of winding down supply of money

07/7/2009 | CNNMoney/Fortune

Federal Reserve Chairman Ben Bernanke has been hailed as "a national hero" for aggressively bolstering the sagging economy, but he might face another challenge. Bernanke or his successor, depending on whether he is reappointed, will need to figure out how to withdraw the $1 trillion in Fed-created money from the economy without pushing the country back into recession. "Your timing has to be perfect," said David Jones, formerly an economist at the Fed. "If you do it too soon, you keep us in a deep recession. And if you do it too late, you get inflation."

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