If the Federal Reserve Board has used all of its policy tools during the current expansion, what happens when there’s a recession?
That’s a question worth asking, even as the Fed appears ready to raise interest rates, albeit by just a smidgen, based on the pretext that ZIRP (zero interest rate policy) is no longer needed, given today’s allegedly booming economy.
On course, the economy’s not booming and we may even be heading into a recession, assuming we aren’t already in one (it’s hard to tell in today’s slow growth-no growth economy). 
Just one sign that the boom is an illusion is the length of the current expansion. The average recovery since the end of World War II has been 58 to 61 months, depending on whose numbers you use. The current “recovery” hit the 58-month milestone in April 2014 – 20 months ago. As David Stockman pointed out this week in his “Contra Corner” blog, “the only expansion that was appreciably longer than the present tepid affair was the 119 month stretch of the 1990s.”
Nothing lasts forever and even Larry Summers, the former Treasury secretary and current Harvard professor, recognizes that the current expansion may be nearing an end. As he wrote last week in a Washington Post op-ed, “U.S. and international experience suggests that once a recovery is mature, the odds that it will end within two years are about half and that it will end in less than three years are over two-thirds. Because normal growth is now below 2 percent rather than near 3 percent, as has been the case historically, the risk may even be greater now.”