George Will is apparently still obsessed with inflation and very disappointed that the Fed's policy of quantitative easing has not led to hyperinflation thus far. This led him to write a seriously confused column condemning the Fed and its Chairman Ben Bernanke.

Will complains:

"A touch on the tiller here, a nimble reversal there — these express the fatal conceit of an institution that considers itself capable of, and responsible for, fine-tuning the nation’s $15.7 trillion economy."

This assertion is incredibly wide of the mark, even getting the size of the economy wrong by $1 trillion. Certainly Bernanke and the Fed are not claiming the ability to fine-tune the economy. If they had this ability then the economy would not currently be operating at a level of output that is $1 trillion below its potential. That is not anywhere in the ballpark of fine-tuning.

The comment that apparently upset Will is Bernanke's claim that the Fed would have no problem raising interest rates and slowing the economy if there was an outbreak of inflation on the horizon. It's not clear why this comment would seem so strange. Inflation only rises very gradually and there has been no problem of inflation growing out of control for more than three decades in the United States or any other wealthy country. This would suggest that Bernanke has some reason for believing that he or his successor will continue to be able to prevent an outbreak of accelerating inflation.

Will is also convinced that the stock market has been artificially inflated by the Fed's quantitative easing and zero interest rate policy. The S&P 500 peaked at over 1550 in the fall of 2007. If it had risen in step with the trend growth rate of GDP it would be over 1950 today, almost 20 percent higher than its current level. For some reason Will never complained about the 2007 stock market level in spite of the fact that it was markedly higher relative to the value of GDP at the time.


Note -- typo corrected in first sentence.