A Flow Chart For Ben Bernanke

A blog about business and economics.
Aug. 31 2012 7:47 PM

A Flow Chart For Ben Bernanke


Reading Ben Bernanke's speech today, I'm reminded of a guy stopped at the corner asking for directions. "Should I go left or right," he's wondering, weighing the pros and cons of each. Someone shows up and he asks him for directions. The natural response: "Are you trying to get uptown or downtown." Turns out he doesn't know! And that's why he can't make up his mind.

Similarly, this morning Bernanke laid out some costs and benefits to "further action" (by which he means bond purchases) first stopping to consider what kind of outcomes he would favor. That's the point of this flowchart.


So what are the options? Well, obviously if you don't want faster growth you don't need to do anything. But if you do want faster growth and you're also a central bank with a price stability mandate, you have to ask yourself if you think faster inflation is a price worth paying. If the answer is "no" then you ought to say that clearly and tell elected officials that they'd better come up with some supply side reforms. More demand's not in the cards, and all the central bank is willing to do is say that if structural reforms happen you'll make sure they don't lead to a slowing of inflation. But if you are willing to tolerate more inflation then, again, the first step is to say that clearly. Maybe you should also make some asset purchases. But you should be clear—both to yourself and to the public—about what you're trying to do. You're trying to boost demand. You think a boost to demand will boost real output. And you know that a boost to demand will increase some prices somewhat. But you think that's a small price to pay for the real growth. So here come the asset purchases with more to come if necessary.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.


Medical Examiner

Here’s Where We Stand With Ebola

Even experienced international disaster responders are shocked at how bad it’s gotten.

U.S. Begins Airstrikes Against ISIS in Syria

The U.S. Is So, So Far Behind Europe on Clean Energy

It Is Very, Very Stupid to Compare Hope Solo to Ray Rice

Friends Was the Last Purely Pleasurable Sitcom

The Eye

This Whimsical Driverless Car Imagines Transportation in 2059


Meet the New Bosses

How the Republicans would run the Senate.

A Woman Who Escaped the Extreme Babymaking Christian Fundamentalism of Quiverfull

How in the World Did Turkey Just Get 46 Hostages Back From ISIS?

  News & Politics
Sept. 22 2014 6:30 PM What Does It Mean to Be an American? Ted Cruz and Scott Brown think it’s about ideology. It’s really about culture.
Sept. 22 2014 5:38 PM Apple Won't Shut Down Beats Music After All (But Will Probably Rename It)
Sept. 22 2014 4:45 PM Why Can’t the Census Count Gay Couples Accurately?
  Double X
The XX Factor
Sept. 22 2014 7:43 PM Emma Watson Threatened With Nude Photo Leak for Speaking Out About Women's Equality
  Slate Plus
Slate Plus
Sept. 22 2014 1:52 PM Tell Us What You Think About Slate Plus Help us improve our new membership program.
Brow Beat
Sept. 22 2014 9:17 PM Trent Reznor’s Gone Girl Soundtrack Sounds Like an Eerie, Innovative Success
Future Tense
Sept. 22 2014 6:27 PM Should We All Be Learning How to Type in Virtual Reality?
  Health & Science
Medical Examiner
Sept. 22 2014 4:34 PM Here’s Where We Stand With Ebola Even experienced international disaster responders are shocked at how bad it’s gotten.
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.