In his Maiden Speech as Fed Chairman
Mr. Bernanke recounted the recent history of the Fed, and it's inflation policies.
But, Bernanke also recognized the sad economic "Law of Unintended Consequences" when he noted:
"The inflationary policies of the 1960s led not to permanently lower unemployment, as the permanent-tradeoff theory predicted, but instead to persistently higher inflation with no improvement in unemployment."
So, the 1960's notion that we could inflate our way to full employment was proven false...
But, something very similar is happening today with our current Asset Inflation, in stocks, real estate and commodities, which, somehow, Bernanke completely ignored.
Asset Inflation, like core inflation, has consequences...and some of these are unforseen, or at least ignored by our economic punditacracy.
To eliminate core inflation in manufactured goods, the US de-industrialized and shipped most of it's high wage union jobs to China and other low wage economies.
This has made the Trade Deficit "structural" for the US...and also unsustainable... Alas, Bernanke was silent on this key issue too. Hopefully he will enlighten us about our structural deficits at some future date.
And, of course, the recent tax cuts and the massive Bush budget deficits were also ignored.
Bernanke's little "history lesson" today was really an Ode to the Miracle of De-Industrialization...and to the Amazing Greenspan Bubble Years...now over.
Lets hope that Bernanke gives us some more substantive ideas about the future, and not the past, in his next speech.
