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Somebody Please tell Ben that he can't do that!


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#1 Iblayz

Iblayz

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Posted 30 December 2006 - 10:58 PM

On November 21, 2002, then Fed Governor Ben Bernanke gave a speech on the subject. It was titled "Deflation: Making Sure "It" Doesn't Happen Here." Bernanke made reference to the government's not-so-secret anti-deflation weapon:

"The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation." (emphasis added)

That anti-deflation speech turned out to be quite prophetic: Bernanke eventually became Fed Chair, and he put those printing presses to good use. Bond desks would nickname him "Helicopter Ben," thanks to his speech that threatened a metaphorical money drop as a way to stave off deflation.




From:



http://www.frontline...sp?id=mwo122906