Monday, October 24

Reaction to Dr. Bernanke Nomination to Fed Chairman

I contacted our local economics expert, Dr, Paul Prentice, who is a UCCS Professor, and President of Farm Sector Economics, for a reaction and comments to Dr. Bernanke's nomination.

Dr. Prentice suggested readers check out Dr. Bernanke's website for insight into his qualifications through his c.v. and his publications. (http://www.princeton.edu/~bernanke/)
In my opinion, the most important qualification for Fed Chairman is understanding that the Fed's primary job is long run price-stabilization, i.e. stabilization of the value of the currency, rather than stabilizing the short run business cycle. This means that the Fed should do less fine-tuning of monetary policy in order to try to fine-tune normal economic cycles. The Fed should instead focus on more of a long run "fixed-money-rule" as proposed by Nobel economist Milton Friedman.

As a macroeconomist, Dr. Bernanke appears to be more inclined toward long run price stability, aka "inflation targeting". Not surprisingly, the market reacted favorably today to the announcement, as have I.

Sincerely,

Paul T. Prentice, Ph.D.
President
Farm Sector Economics, Inc.

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