Having turned the dollar into toilet paper and sent inflation soaring to 1970s levels (measured the way inflation was measured then), Fed Chairman Ben Bernanke appears to be changing his tune. The economy seems better, he said in a speech yesterday in Massachusetts. Now it’s inflation that is the primary concern. WSJ:
“Although activity during the current quarter is likely to be weak, the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so…[although] growth risks remain to the downside. The latest round of increases in energy prices has added to the upside risks to inflation and inflation expectations… [The Fed] will strongly resist an erosion of longer-term inflation expectations, as an unanchoring of those expectations would be destabilizing for growth as well as for inflation.”
The slow-motion train wreck of consumer spending has shown few signs of sustainable improvement, so the relative optimism on the economy may be premature. The focus on inflation, meanwhile, is overdue.
See Also: Back to the 70s? We’re Already There