October 25, 2005

THE 70S ARE FINALLY OVER:

Fed nominee a master of `Oops!' (Brett Arends, October 25, 2005, Boston Herald)

Bernanke is thought to take a more relaxed view of inflation than his predecessor. After all, his research at MIT focused on the Great Depression, and the disaster of collapsing prices.

That may be worrying enough for bond investors, who are vulnerable to inflation.

But Bernanke, in his first years as a member of the Fed's board, has also shown he can be a loose cannon.

And in the bond market, loose talk from a Fed governor can cost billions.

In speeches in November 2002 and July 2003, he explicitly raised the spectre of Japanese-style falling prices in the United States.

And he spoke alarmingly of emergency measures the Fed might use to prevent it.

Among them: slashing short-term rates to zero percent, wholesale printing of new dollars, making cheap loans to banks and a huge Fed program to buy up assets across the economy to restore confidence and liquidity.

He'll have to raise rates a couple more times just to prove his anti-inflation bona fides, but then he'll get rates back down to where they should be in a deflationary epoch.

Posted by Orrin Judd at October 25, 2005 11:03 AM
Comments

"The 70's are finally over:"
Now all we have to do is drive a stake into the 60's and we're home free.

Posted by: Mikey at October 25, 2005 2:21 PM

A deflationary "epoch" that has started out with the doubling of the price of gold and real estate going thru the roof.

Posted by: h-man at October 25, 2005 3:14 PM

"He'll have to raise rates a couple more times just to prove his anti-inflation bona fides, but then he'll get rates back down to where they should be in a deflationary epoch."

In other words, OJ, wait until 2007 or so to refinance your mortgage?

Posted by: hess at October 25, 2005 3:44 PM

The flower children of the 60's are so over now that they're eligible for Medicare.

Posted by: tefta at October 25, 2005 3:46 PM

Yeah, Tefta, but they won't SHUT UP! "You young whipersnappers don't know how good you have it! Why when I was your age I had to walk to my protests and draft card burnings! Up hill both ways! In a raging blizzard of tear gas....zzzsnorezzzz. Huh? What was I sayin'? I'm tired and Hoover is after me."

Posted by: Mikey at October 25, 2005 4:20 PM

h:

You work fewer hours to pay for housing than your father did.

Posted by: oj at October 25, 2005 5:01 PM
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