Saturday, January 9, 2010
Ben Bernanke's AEA Speech
On New Years Day I wrote a piece on the surprising increase in the number of references to the Taylor rule in 2009. Little did I know that two days later Federal Reserve Board Chairman Ben Bernanke would start off 2010 with a speech with 50 more references at the American Economic Association (AEA) meeting in Atlanta. The speech was largly an attempt to refute the now commonly held view that the Fed held interest rates too low for too long in 2002-2005. I was in Atlanta and though I could not go to the speech I read it afterwards and expressed by disagreement first in a Bloomberg interview with Steve Matthews and later in a CNBC interview with Larry Kudlow and will follow up with more details; note that a working paper prepared by seven Fed Board staff was released just before the speech. Others have raised questions about the speech from a variety perspectives, including David Beckworth, Caroline Baum, David Leonhardt, Mike Shedlock, Judy Shelton. There is much for the Financial Crisis Inquiry Commission to digest.