Surely you are not saying that these words of Bernanke were the trigger for the Financial Crisis? But even if they were, that error is insignificant in the face of allowing the actual market inflation expectation to fall not just below target but below zero and remain below target for most o the next decade!
Shocks happen, maybe even self inflicted shocks. It the Fed's job to counteract those shocks with changes in its instrument settings to preserve or quickly return inflation to its target rate. [And my guess is that the quickest way back to target is to go over target for a period.]
Great column.
Surely you are not saying that these words of Bernanke were the trigger for the Financial Crisis? But even if they were, that error is insignificant in the face of allowing the actual market inflation expectation to fall not just below target but below zero and remain below target for most o the next decade!
Shocks happen, maybe even self inflicted shocks. It the Fed's job to counteract those shocks with changes in its instrument settings to preserve or quickly return inflation to its target rate. [And my guess is that the quickest way back to target is to go over target for a period.]
Thomas, that´s exactly what I´m saying!
https://thefaintofheart.wordpress.com/2012/10/27/the-housing-boom-financial-crisis-the-great-recession-3/
Housing accelerated after Nov. 2002 because money flows reversed in 2002. Housing peaked in 2006 because money flows peaked in 2006.
The "administered" prices would not be the "asked" prices, were they not “validated” by (MVt), i.e., “validated” by the world's Central Banks.
Thomas, that´s exactly what I mean! Fed words are "powerful"!
https://thefaintofheart.wordpress.com/2012/10/27/the-housing-boom-financial-crisis-the-great-recession-3/