Steve Hanke vs Ben Bernanke & the Fed

Quotable:

“During his face time [on national TV Ben] Bernanke explained many things ..  Unfortunately, he did not address my main beef with the bank: that it clings to a flawed inflation-targeting regime with a horrible history of monetary policy failures ..

In November 2002 then governor Bernanke .. misdiagnosed a benign cyclical dip in the price level.  Fearing deflation, the Fed panicked, and by July 2003 pushed the Fed funds rate down to a then record low of 1%, where it stayed for a year, allowing a flood of liquidity to hit the economy and the housing bubble to inflate. The Fed ignored economic theory developed by Austrian economists such as Nobel laureate Friedrich Hayek, who demonstrated that there was such a thing as a “good deflation,” which occurs during a productivity boom. It was just such a boom, coupled with an improvement in the U.S. terms of trade, that was putting down downward pressure on the core inflation rate .. “

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