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Bernanke needs to learn two crucial lessons of the 1970s before it's too late, says Volcker...

Bernanke needs to learn two crucial lessons of the 1970s before it's too late, says Volcker biographer William Silber: "First, we can’t get a permanent reduction in unemployment by inflating... Second, we’ve got to worry about inflation even with unemployed resources." But after five rough years, U.S. citizens "may not tolerate a central bank that acts pre-emptively, as it must, to prevent inflation."
Comments (11)
  • Absolutely true. This is often referred to as pushing on a string. The Fed has done about all they can.

     

    And UE and inflation can occur at the same time so inflating without any thought that inflation can occur is wrong.
    25 Sep 2012, 06:29 PM Reply Like
  • Nothing in history has ever provided PERMANENT reduction in unemployment so his first 'lesson' makes no sense. And what inflation is he talking about? For 4 years we've heard from inflation fear-mongers and still no inflation. Eventually, of course, inflation will re-emerge (and then we'll hear the "I told you so's") but probably for a cause not presently anticipated.
    25 Sep 2012, 06:37 PM Reply Like
  • Can I pay prices from 4 years ago with the exception of housing? Real wages are falling against everything so if you like everyone living in poverty then I guess you can hide behind a macro number that takes the most important household items out.

     

    Secondly inflation can come with a lag. Look at policies in the late 60's driving inflation in the 70's.

     

    Agree there is not permanent anything for that matter.
    25 Sep 2012, 06:46 PM Reply Like
  • computers are cheaper, tv's are cheaper, smart phones are cheaper, books and music are cheaper, lots of things people use every day are cheaper and lots of things are more expensive. the cpi is the most reasonable measure of inflation and that has not been high in the last 4 years in spite of 'inflationary' fed pressures. when it does re-emerge sometime in the future, i'm sure i'll hear from you that it is the lagged result of present fed policies.
    25 Sep 2012, 06:56 PM Reply Like
  • Smart phones are not cheaper. Books are not cheaper. TV's are hard to compare but generally the price points are not much different.

     

    The two biggest categories are more expensive outside of housing. CPI is not a measure it is a placebo.
    25 Sep 2012, 07:35 PM Reply Like
  • Well said Frost.

     

    It is clear inflation is below the average. Resource utilization is low, labor markets are still under pressure. We need more Quantitative Easing, Bernanke is too conservative. We need more than $200B per month.
    25 Sep 2012, 09:26 PM Reply Like
  • I should say core CPI.
    26 Sep 2012, 01:01 AM Reply Like
  • I've been separated for a bunch of years and have a couple of kids with me so I do the shopping and know the prices. Milk, eggs, butter, ground beef etc....not much changed in four years, Other things like laundry detergent, bacon, potato chips have had big price increases and/or package shrink. Forget name brands and pay attention and you can pay prices from four years ago.
    26 Sep 2012, 05:54 PM Reply Like
  • The CPI index does have energy and food included.
    It is running below average.
    25 Sep 2012, 09:28 PM Reply Like
  • Sorry Core CPI.
    26 Sep 2012, 01:02 AM Reply Like
  • My bad, double post.
    26 Sep 2012, 06:46 AM Reply Like
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