Ten Years Ago: A Federal Reserve Not Understanding the Situation at All

Occurrences in August 5, 2008, FOMC Meeting Transcript:

322: Inflation

029: Liquidity

029: Spreads

028: Unemployment

011: Crisis

001: Solvency

000: Minsky

000: Lehman

000: Bear-Stearns

A Federal Reserve looking in exactly the wrong direction ten years ago: Federal Reserve: FOMC Meeting Transcript: BERNANKE: "On inflation, I do have concerns, as everyone else does.... We will continue to see that high level of prices being passed through into the core...

...but I would argue that if���and this is a very big ���if������commodity prices do begin to stabilize within the general range of what we see now, I think that the inflation concerns will moderate over time because they will have lost essentially their driving force.... I want to be very clear: I think that containing inflation is enormously important, and I think it is our first responsibility. We need to watch this very carefully. I think there will be continued pressures even if commodity prices don���t rise, but I do think there is also a chance that we will see a moderation of this problem going forward....

There has been a lot of discussion about the appropriate withdrawal of stimulus. Again, I don���t think I accept the idea that we are currently in an extremely stimulative situation. However, if financial markets were to normalize, for example, that would lead to a more stimulative situation. I would like to say just a word about that. That is to say that the speed at which we remove the accommodation���and I think it is clear we do have to do that relatively soon���should depend to some extent on how inflation evolves...

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