Bernanke Then and Now

Courtesy of Sen. David Vitter (R–La.), Brad DeLong gets the chance to ask Ben Bernanke why he’s not willing increase the Fed’s inflation target from 2% to 3%:

The Federal Reserve has not followed the suggestion of some that it pursue a monetary policy strategy aimed at pushing up longer-run inflation expectations. In theory, such an approach could reduce real interest rates and so stimulate spending and output. However, that theoretical argument ignores the risk that such a policy could cause the public to lose confidence in the central bank’s willingness to resist further upward shifts in inflation, and so undermine the effectiveness of monetary policy going forward. The anchoring of inflation expectations is a hard-won success that has been achieved over the course of three decades, and this stability cannot be taken for granted.

I think this demonstrates pretty well why it’s entirely possible to say both (a) Bernanke’s background made him extremely well suited to play a crisis management role in 2007-08 and he did a good job at it, but (b) he’s not the right guy to lead the Fed going forward.  What we’re likely to need over the next few years isn’t a crisis manager, but someone who unwinds the Fed’s position gradually and takes its role in boosting employment more seriously.  But Bernanke is a mainstream conservative, and mainstream conservatives have always been more concerned with inflation than with unemployment.  This was entirely predictable, and it’s why, even though he did a creditable job in his first term, he shouldn’t have gotten a second.

Fact:

Mother Jones was founded as a nonprofit in 1976 because we knew corporations and the wealthy wouldn’t fund the type of hard-hitting journalism we set out to do.

Today, reader support makes up about two-thirds of our budget, allows us to dig deep on stories that matter, and lets us keep our reporting free for everyone. If you value what you get from Mother Jones, please join us with a tax-deductible donation so we can keep on doing the type of journalism that 2018 demands.

Donate Now