Sunday, June 10, 2012

Romer Puts the Pressure on Bernanke to Inflate

Christina Romer, an economics professor at the University of California, Berkeley, and former chairwoman of President Obama’s Council of Economic Advisers, uses her interventionist cred to call for more Fed money printing.

In a column at NYT, she writes:
The argument for additional monetary action is straightforward. By law, the Fed is supposed to aim for maximum employment and stable prices. But the unemployment rate is 8.2 percent — a good two percentage points above what even the most pessimistic members say is its sustainable level. Moreover, the spate of disappointing data and the deepening crisis in Europe make continued weakness all too likely.

What about the arguments against further action? I don’t think they are convincing enough to win the debate...the Fed is the only plausible source of immediate help for the American economy...

If inflation is at the target and unemployment is way above, it’s sensible to risk a little inflation to bring down have a big impact, the monetary actions need to be bold — and pursued with gusto...

The Fed meeting will be the first for two new governors, Jerome H. Powell and Jeremy C. Stein. It would be a great time to confront some of the faulty arguments being made against aggressive Fed action. For all our sakes, I hope Mr. Powell and Mr. Stein jump right in.

Is Obama talking to Bernanke through Romer?  It's possible, though I'm not sure Bernanke needs much of a push to launch some type of QE3. If he doesn't launch one to keep the Fed manipulated boom going, the U.S. stock market will likely crash after the meeting. If he does launch some sort of QE3 program following the meeting, the manipulated boom will continue, but severe price inflation will be lurking around the corner.


  1. Bernanke is a kid with an ant farm, a magnifying glass, and puppet strings being held by the .01%.

    It was absolutely excruciating to see the cover of The Atlantic proclaim him a hero.

    After seeing the cover, I felt like I needed a bath.

  2. I have not seen severe price inflation. The dollar index is up to 83 from 72. Gold, oil, and interest rates are down. I agree with Mish's deflationary credit contraction theory, that the private sector is going through a massive deleveraging. New money flows into banks and they just sit on it. We are on Japan's path. Bernanke is prolonging the correction with QE. Japan has been doing the same for 20 years. It's time to acknowledge reality. Austrians are ignoring the private sector component of our money supply, which comes from bank credit through fractional reserve lending.

    1. And what happens when those excess reserves start spilling into the economy?

  3. I didn't know this dual mandate of the Fed was a LAW? Do they get arrested if they don't reduce unemployment or if their actions directly contribute to price "instability"?

  4. My God will this madness ever end?

    I suppose it will will...badly.

  5. I think you left off the last word on your headline: "More"