I’ve been making my way to Toulouse and haven’t followed all of the details. Scott Sumner has many good posts on the topic, and I would put it thus: the Fed probably decided to do the best it could within political constraints and a framework of more or less stable prices. Which won’t do much good at all. Keep in mind:
1. The median voter hates price inflation. Don’t blame Bernanke.
2. Today price inflation will accelerate real wage erosion, or at least is perceived so, who wants to take credit for that?
3. Core CPI is already going up at a rate of two percent and 3.8 percent for the broader bundle, at least for the time being. Voters don’t know or care what is embedded in the TIPS spread, etc.
4. Some of the “inflationists” ignored supply-side factors and bottlenecks and didn’t see this price pressure coming. That has thrown their entire analysis into doubt, unjustly probably but nonetheless. In any case it is no longer the simple story where Q goes up first and only later does P rise.
5. If Ron Suskind is to be believed, our President seems not to know the difference between TFP and per hour labor productivity; in his defense a lot of economists don’t quite get that either.
6. The GOPers now send Bernanke epistolary romances.
7. Some people on Twitter were taking about “striking down Old Ben and having him come back stronger,” but a) Obi-Wan plain, flat out died, b) Obi-Wan’s younger prodigy, Luke, was a failure who relied on his dad and wouldn’t at the key moment listen to Old Ben and stay on the Dagobah system to invest in additional human capital (instead he read Caplan on the signaling model), and c) they never even made the final three movies of the planned nine, so we don’t know how it turned out with the unwinding of the fiscal stimulus on the Ewok world. People, next time get your facts straight!
Every now and then, you ought to conclude that what you see is what you get and that is because of the rules of the game. When it comes to further monetary stimulus, I’m not sure there’s so much more to say.