….he also suggests it is possible the nation could be in for a period of “stagflation,” a word Mr. Bernanke says was invented in the 1970s.
“Even under the benign scenario, we should have a slowing economy,” he said. “And inflation’s still too high but coming down. So there should be a period in the next year or two where growth is low, unemployment is at least up a little bit and inflation is still high,” he predicted. “So you could call that stagflation.”
He is particularly aware that runaway inflation can quickly become a political issue — possibly putting the Federal Reserve in the cross-hairs of the public — in a way that even unemployment doesn’t evoke. “The difference between inflation and unemployment is that inflation affects just everybody,” he said. “Unemployment affects some people a lot, but most people don’t respond too much to unemployment because they’re not personally unemployed. Inflation has a social-wide kind of impact.”
Mr. Bernanke appears to be somewhat concerned about the credibility of the Federal Reserve in the public consciousness, especially given the aggressive approach that he took in 2008 and that Mr. Powell continued during the pandemic. “I had this fantasy conversation in my head between Jay Powell and William McChesney Martin, where I think Martin probably would have had apoplexy or something because of the different things that intervening chairs have done,” he said, referring to Mr. Martin, the chair of the Federal Reserve from 1951 to 1970.
Bernanke is hopeful that Powell, the current Federal Reserve chairman, can help tame inflation without having to put in place the extreme measures that Volcker did in the 1970s or send the economy into recession.
Ben Bernanke Sees ‘Stagflation’ Ahead https://t.co/rZ2EuGbfUN
— Sean Graf (@seangraf) May 16, 2022