Why Fighting Inflation Will Be Harder Than You Think

Federal Reserve chairman Bernanke testified last Tuesday (July 21) that there is no inflation danger even though the Fed is keeping short-term interest rates very low and the banks are awash with excess reserves (lendable cash), to the tune of some $800 billion, which if used for loans rather than left sitting in the banks' accounts in federal reserve banks would increase the amount of money in circulation by a considerable amount. Bernanke explained that if signs that unwanted inflation is looming appear, the Fed can head off the inflation in a variety of ways.


Continue reading this post by Richard Posner at our Correspondents blog here: