Hooked-up on “communication”

In addition to his “creditism”, Bernanke is a “communications addict”. Only it´s much simpler than he makes it out to be. Instead of publishing “betting boards” he could come out and credibly commit to a TARGET – preferably an NGDP level target.

Tim Duy has a good take:

Maybe the next round of QE will do the trick, but I remain skeptical. Policy has consistently fallen short of that necessary to decisively propel the economy off the zero bound. Such policies have, in my opinion, fallen victim to fears of inflation. The Federal Reserve appears committed to a 2% target under any circumstances, with even a temporary increase considered unacceptable.

In short, I see the Fed’s policy as toxic not so much because interest rates are locked at the zero bound, but because the Fed sees no urgency in rectifying the situation. I think this will be proven to be a serious policy failure when the next recession arrives, and I wish the Fed would make a clear objective to lift the economy off the zero bound, rather than issue a forecast that, when coupled with lack of immediate policy action, represents acceptance of the zero bound. 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.