Nov 25, 2008

Bernanke on Deflation

A speech by Bernanke on deflation...delivered on Nov 21, 2002, at the National Economists Club in Washington.  He talk about the possibility of deflation in the US and what the Fed can do (even after policy rates come down to zero)... its a long speech that describes defation, the causes, how the Fed can prevent it and how the Fed can cure it if it actually comes about..

Bernanke underscores how a fiat money system money system can be used to fight deflation by printing money and buying all kinds of assets and undertaking aggregate demand stimulating policy measures.. I can see gold becoming  more and more attractive (read post) read the speech here

1 comment:

  1. Good post, and interesting speech. I recently learnt what he meant by inflationary bias. If you work out the algebra of the monetary policy reaction function of an inflation targeting central bank, you will see an inherent inflationary bias in it - will demonstrate the algebra to you sometime - it's very interesting!