Not Enough Inflation
From the NY Times
A few days ago, Alan Greenspan, the former chairman of the Federal Reserve, spoke out in defense of his successor. Attacks on Ben Bernanke by Republicans, he told The Financial Times, are “wholly inappropriate and destructive.” He’s right about that — which makes this one of the very few things the ex-maestro has gotten right in the past few years.
But why are the attacks on Mr. Bernanke so destructive? After all, nobody in America is or should be immune from criticism, least of all those — like the chairman of the Fed — who, by the nature of their positions, have immense power to make our lives better or worse. And while there is an unmistakable thuggishness to the campaign against the Fed, most famously Rick Perry’s warning that the Fed chairman would be treated “pretty ugly” if he visited Texas, surely the bad manners of the critics aren’t the most important issue.
No, the real reason the attacks on Mr. Bernanke from the right are so destructive is that they’re an effort to bully the Fed into doing exactly the wrong thing. The attackers want the Fed to slam on the brakes when it should be stepping on the gas; they want the Fed to choke off recovery when it should be doing much more to accelerate recovery. Fundamentally, the right wants the Fed to obsess over inflation, when the truth is that we’d be better off if the Fed paid less attention to inflation and more attention to unemployment. Indeed, a bit more inflation would be a good thing, not a bad thing.
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