Ask Ben - PBS and Ben take questions

[atbell]

Check it out, Ben Bernanke is taking questions from the public:

http://www.pbs.org/newshour/insider/

My question's already in, I want to know to what extent he things inflation measures are biased one way or the other.

[atbell]

Here's the summary of the paper I just finished on this forum.

Originally Posted by atbell Paper

On July 26th, 2009 Federal Reserve Governor Ben Bernanke held an open forum to address public questions about the Federal Reserve, its operations, and the part it played over the course of the financial crisis. This paper is a summary of that forum and observations of the author. As with many such papers the goal of the work is to distil the initial release, in this case a 45 minute discussion between Mr. Bernanke and the PBS studio audience, while organizing the material into major topic subdivisions.

5 topics were identified, Regulation, Politics, Inflation, Crisis Response, and Comparative Case Studies. Each of these broad topics is discussed in their own sub-section where the merits and flaws of Mr. Bernanke’s responses are scrutinized.

For the most part summaries of this type are repetitive for those who follow macroeconomics with any degree of regularity. With this in mind the paper has attempted to identify some of the hidden points that are discussed less often yet might be valuable to decision makers in the future.

Holistic economic evaluation was one such point that Mr. Bernanke suggested. This approach might help mitigate future financial problems by evaluating the economy from a holistic perspective in addition to individual companies. This would allow regulators and decision makers to be able to spot cross company trends earlier.

Another point of note from the forum was the ascertation that the Federal Debt and the Federal Reserve are theoretically unrelated. This fact means that in theory the choice to default on debt is a political decision whereas the choice to print money is apolitical. This is important to understand because when considering the risk of debt default in the US the alternative is inflation through increased money supply. Since Federal Reserve actions generally lag policy the decision to default will be made first and then the Fed will respond as required.

One interesting program that was brought up was the Fed financing the purchase of debt from banks. This sponsorship of what is essentially citizen banking could be quite positive. It allows holders of capital to finance debtors who they know are credit worthy at a reduced cost.

Finally there is one issue that seems significantly absent, that of international comparative evaluation. As much as the Federal Reserve, and the broader financial media, have scrutinized the economic collapse from a temporally comparative point of view there has been a consistent absence of international inter-temporal comparison. A number of case studies spring to mind including the debt crises in Latin America, the Asian Financial crisis, and the Russian crisis. An increase in the cases used for comparative analysis would likely be quite revealing.

If anyone wants more info let me know.

PS. he didn't address my question about biases in inflation rate reporting.

[judge wopner]

Originally Posted by atbell

Here's the summary of the paper I just finished on this forum.

PS. he didn't address my question about biases in inflation rate reporting.

i found your point about debt default being political while debt creation is apolitical very interesting and it never occurred to me as such.

i think its pointless to argue about inflation stats, they are constantly rejigged to favour a lower rate imho. though with owner equivalent rent used in the calculation id be curious to see if they change that to reflect the slide in housing prices.