Five Economics Paragraphs Worth Reading: December 18, 2009
Time for Some Hand-Forcing at the Fed?

Will Wilkinson on the Pringles Problem

Will Wilkinson likes extruded salt-based potato product, and writes about monetary policy:

Bernanke and the Pringles Problem: I guess we could call it the “Pringles Problem.”... Bernanke seems to think that if the Fed tries to increase long-term inflation expectations once, a fair portion of the public will suspect that the Fed won’t be able stop, will act on the expectation of runaway inflation, and everything will go to s---... “such a policy could cause the public to lose confidence in the central bank’s willingness to resist further upward shifts in inflation, and so undermine the effectiveness of monetary policy going forward.” OK. But I believe that the Fed can eat just one. Bernanke believes the Fed can eat just one.... But some significant part of the “the public” does not. How exactly does one measure the public’s position on the Pringles/Lay’s Problem?... Is there survey evidence about this? Anything? If the Fed can’t credibly signal a commitment to a theoretically sound monetary policy, why not?... [M]y educated hunch is that there is no sound technocratic science here, just the educated hunches of cautious technocrats. May Bernanke’s gut be true.

My hunch is that the right quote to grasp for is R. G. Hawtrey's, on those who in 1930-1933 were worried about excessive inflation. He said they were:

crying "Fire! Fire!" in Noah's Flood.

OK. It's 10% unemployment in America, not 23%. And the world's second industrial power's president is not about to appoint Adolf Hitler as Reichskanzler. So take a deep breath. Calm down...