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Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling.

Ben Bernanke

Economics is a very difficult subject. I’ve compared it to trying to learn how to repair a car when the engine is running.
BEN BERNANKE

Car Running Trying
One might as well try to perform brain surgery with a sledgehammer.
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Brain might Trying
September and October of 2008 was the worst financial crisis in global history, including the Great Depression.
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Financial October September
The crisis in Europe has affected the US economy by acting as a drag on our exports, weighing on business and consumer confidence and pressuring US financial markets and institutions.
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Acting Country Financial Lace
The crisis and recession have led to very low interest rates, it is true, but these events have also destroyed jobs, hamstrung economic growth and led to sharp declines in the values of many homes and businesses.
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Growth Home Jobs
Weaker currencies abroad mean a strong dollar, and a stronger dollar, together with a weak global environment, is a drag on the U.S. econom.
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Important Mean Strong
The amount of currency in circulation is not changing. The money supply is not changing in any significant way.
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Currency Significant Way
The more guidance a central bank can provide the public about how policy is likely to evolve the greater the chance that market participants will make appropriate inferences.
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Chance Guidance Inference
I served seven years as the chair of the Princeton economics department where I had responsibility for major policy decisions, such as whether to serve bagels or doughnuts at the department coffee hour.
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Coffee Responsibility Years
It’s the price of success: people start to think you’re omnipotent.
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People Price Success Thinking
Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling.
BEN BERNANKE

Economy Risk Struggle
The sources of deflation are not a mystery. Deflation is in almost all cases a side effect of a collapse of aggregate demand.. a drop in spending so severe that producers must cut prices on an ongoing basis in order to find buyers.
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Cutting Ongoing Order
The Federal Reserve is not currently forecasting a recession.
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Federal Forecasting Recession Reserve
Importantly, in the 1930s, in the Great Depression, the Federal Reserve, despite its mandate, was quite passive and, as a result, financial crisis became very severe, lasted essentially from 1929 to 1933.
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Depression Financial Great Result
I and others were mistaken early on in saying that the subprime crisis would be contained. The causal relationship between the housing problem and the broad financial system was very complex and difficult to predict.
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Casual Financial Problem Relationship
While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S.
BEN BERNANKE

Delinquency Rising Years

Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling.

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Although low inflation is generally good, inflation that is too low can pose risks to the economy – especially when the economy is struggling.

Related Topics

Popular Authors

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