Monday's weak retail sales data provides more evidence of the economy's sluggish state, raising the stakes for Fed chairman Ben Bernanke's Congressional testimony this week.

The slowing economy -- and what Bernanke plans to do about it -- will top the agenda during the chairman's appearance before the Senate Banking Committee on Tuesday and the House Financial Services Committee on Wednesday. (Bernanke is also likely to face questions about the fiscal cliff and the brewing LIBOR scandal, among other topics.)

At issue is whether Bernanke will tip his hand about prospects for another round of quantitative easing (a.k.a. QE3) or some other form of policy easing. While Bernanke is unlikely to provide any specifics on the plan of action, he's almost certain to reiterate the Fed's prior pledge to "take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability."

Despite chatter about the Fed having "run out of bullets," the reality is the Fed still has policy levers it can pull, i.e. other tools in its proverbial toolbox.

"Remember: They can buy anything, they're not just limited to Treasuries and mortgages," says Jim Rickards, author of Currency Wars: The Making of the Next Global Crisis and a partner in JAC Capital Advisors, a New York-based hedge fund. "They can buy stocks if they feel like and if things get bad enough they probably will."

The Fed is unlikely to be buying stocks anytime soon and Rickards doesn't expect any new policy announcement until late summer or early fall. But he does expect more easing and something beyond prior QEs, when the Fed announced it would buy a certain amount of assets in a certain time-frame.

"The next round will be open-ended," he predicts. "The Fed will say ' we're prepared to buy when we think it's necessary.'"

In addition, and in conjunction, Rickards believes the Fed will soon being targeting nominal GDP, which is the inflation rate plus real (inflation-adjusted) GDP. Nominal GDP is a technical term for the dollar value of everything produced in the economy and a proxy for our collective ability to service our debt. (See: Christina Romer: The Fed Is "Failing Terribly" and Needs to Do MORE, Not Less)

"Without nominal GDP growth you're never going to pay off the debt," Rickards says, suggesting the Fed would be willing to tolerate -- and even encourage -- higher inflation in order to give nominal GDP a boost. "The Fed in effect [will be] throwing in the towel on inflation."

Supporters of such a move, such as Fed vice chair Janet Yellen, believe inflation is not a threat given low levels of industrial production and abundant slack in the labor market. But Rickards is more concerned about the long-term implications, as detailed in his book, and the Fed letting the proverbial inflation genie out of the bottle.

Inflation might be low now but "the problem is it can skyrocket if you reach a tipping point" in terms of inflation expectations, he says. "The Fed is missing the role of psychology, behavioral effects and the velocity of money."

More importantly, Rickard believes "we are Japan" and, therefore, any new Fed policies will be hard-pressed to change the economy's trajectory.

"The problem is we're in a depression," he says, dismissing chatter about 'double-dip' recessions. "You can have growth and declining unemployment in a depression but you never get back to trend. You get a little better and then you fall back into the trap. It's happened three years in a row." (See: We Are Living in a 'Modern-Day Depression': David Rosenberg)

Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com