A Reminder…


Bernanke speech in 2002:

“The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost,” Bernanke said in remarks to the National Economists Club in Washington in November 2002.

“By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services,” he said.

During that speech, Bernanke added that “prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.”

CNN

I don’t doubt for one second that Bernanke will use the ‘nuclear’ option to prevent the natural deflation that should be occurring now given the worst downturn since the Great Depression. He of course has already showed that he is willing to increase the monetary base very quickly.

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