Bernanke in the Hole by Krugman

Jackson Hole, that is. 

My quick summary:

1. Things are really, really bad.
2. The damage is cumulative; the longer this goes on, the worse the prospects for the future.
3. The Fed has the power to do a lot to help the economy.
4. While you can argue that there are costs to action, the case for major costs is quite weak, and in particular much weaker than the case for major benefits.
5. Therefore, what we at the Fed will do is, um, sit on our hands some more, and think very seriously about maybe, someday, doing something.

The Key Points From Ben Bernanke's Jackson Hole Speech by Yglesias

Here's what you need to know:

— The basic point of the speech was to defend past acts of quantitative easing.

— A secondary theme is to create some rationale for future acts of QE.

— But Bernanke continues to insist that there are hard-to-quantify and not-well-explained downside risks to QE, which mean that at the zero bound we need to tolerate larger output gaps than we would otherwise tolerate.

— The logical implication, which Bernanke does not draw, is that a 4 percent long-term inflation target would lead to fewer and shorter recessions and more real output over the long term.

— In general, Bernanke simply refuses to acknowledge the existence of the NGDP targeting line of criticism even though it's been embraced by a growing chorus of voices that includes the president of the Chicago Fed, former CEA Chair Christina Romer, and many voices in the press.

— Bernanke says fiscal austerity is currently a drag on the economy and will be an increasing drag going forward and claims that he "cannot neutralize the fiscal and financial risks that the country faces."

— A related point is that he simply fails to acknowledge that the country's primary macroeconomic stabilization institution might bear some responsibility for the biggest failure of macroeconomic stabilization in 70 years.

The Fed is suffering from self-induced paralysis. What the Fed needs is some "Rooseveltian Resolve." The problem is that the Central Planners at the Fed are looking after the institution's interest at the expense of the nation's.