Reviving '70S Stagflation; Federal Reserve Monetary Policy Promises Inflation and Unemployment
Byline: THE WASHINGTON TIMES
As President Obama restores the Jimmy Carter-era solar panels to the executive mansion, Federal Reserve Chair-
man Ben S. Bernanke is bringing back Mr. Carter's monetary policy, running the printing presses faster than they've run since lava lamps and disco were in style.
Mr. Bernanke's plan is to flood the market with currency by buying $600 billion in government bonds and $280 billion in mortgages over the next eight months. The last time America went down this path, the result was stagflation - the devastating combination of high unemployment and inflation. Of course, hovering near 10 percent, unemployment is too high already. Mr. Bernanke told a Boston Fed conference last month that the current inflation rate under 2 percent was too low, so he's going to boost it.
While inflationary policies can provide an artificial lift to employment, the effect is short-lived. Unexpected increases in the inflation rate temporarily deceive workers into thinking they're getting a better wage offer, and thus, companies can hire workers at a lower real cost. …