It’s here. Frustrated that “nominal interest rates cannot be reduced below zero,” he makes the case that “unconventional” approaches are needed (direct purchases of securities with freshly created, high-powered money). This is not a problem, he says, because the Fed “will take account of the potential costs and risks of nonconventional policies…”
If inflation goes wild, it is your fault for not trusting the Fed:
Another concern associated with additional securities purchases is that substantial further expansion of the balance sheet could reduce public confidence in the Fed’s ability to execute a smooth exit from its accommodative policies at the appropriate time. Even if unjustified, such a reduction in confidence might lead to an undesired increase in inflation expectations, to a level above the Committee’s inflation objective. To address such concerns and to ensure that it can withdraw monetary accommodation smoothly at the appropriate time, the Federal Reserve has developed an array of new tools. With these tools in hand, I am confident that the FOMC will be able to tighten monetary conditions when warranted, even if the balance sheet remains considerably larger than normal at that time.
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Basic ecnomics and history be damned:
“I am confident that the FOMC will be able to tighten monetary conditions when warranted”
Ben is confident he can do what NO ONE else has ever accomplished. I feel better now
I believe the problem was solved once .
http://www.youtube.com/watch?v=ggxX1hPLbg0
…….I should really stop procrastinating going to that coin shop.
How is the simple acknowledgement that inflation is a function of both expectations and the money supply (and that we should distinguish both effects) tantamount to this “it’s your fault” taunt?
Would you disagree that inflation is a function of both the money supply and expectations?
He seems to doubt that reality itself would dictate that result – rather it is solely a result of lacking confidence. This hardly a new theory. It’s why the government made WIN buttons in the 1970s. the belief here is that you can get away with anything so long as no one catches on.
Could you clarify where he thinks “solely”? I don’t read that anywhere. Where did you read that?
don’t be pedantic. He draws a causal link between expectations and inflation, without reference to the underlying fundamentals. Daniel, there is precedent for this type of thinking. It is an extension of the confidence model of macroeconomics.
Jeff Tucker’s interpretation of Bernanke’s remarks is completely reasonable. I am wondering if Daniel Kuehn should pursue a career in law rather than economics?
He uses the term “unjustified”. That is where the “your fault” aspect comes in. He has no job saying what is “justified” or not as public confidence levels hinge on personal preferences.
Keynesians are funnily reminiscent of Marxists in this aspect (and on others too, but that’s not the point). Marxists rant and lament the ignorance of the worker class, who tragically can’t envision the glorious future that they must bring about. Keynesians, on the other hand, seem to bemoan the “backward” thinking of the masses, who just can’t understand that their trusting the printing press would make everything that much better.
It’s all about the faith, people. Our wise experts aren’t able to get us out of this mess if we don’t trust them enough. WE MUST BELIEVE HARDER!
So where’s the inflation in Japan?
What was your question? I didn’t hear because I was too busy buying this $80 dvd from Japan.
It’s in the prices that would otherwise be lower had they not bailed out their incompetent banks.
There’s also the fact that Japan has a very large savings rate that retards the rise of prices, much like American banks refusing to lend keeps prices down here.
Does bernanke really want to go down the road of hyper-inflation? Past history shows what it did to germany.I think were at a cross-roads right here, right now, two choices , 1) hyperinflate 2) deflate pick your posion….no in between. It will not take long for the markets to evaporate QE1 and QE2.If i’m not mistaken QE1 was 1.4 trillion and the dow rose a total of 400 pts.
What does Bernanke mean, “the Federal Reserve has developed an array of new tools” to prevent a loss of confidence in the currency. Does he mean an array of new propaganda tools, or some kind of devious and clever (to them) way of trying to disguise the monetization of federal debt? No wonder they’re terrified by the thought of a Fed audit.
Government officials should be barred from using the word inflation. They should be required to directly state that their proposed solution is to reduce the value of the of everyone’s savings, salary, wages, etc. It’s similar to the current use of ‘revenues’ instead of taxes.
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