Former Fed Chief: Inflation Isn't Dead

Former Federal Reserve Chairman Paul Volcker, famous for helping whip sky-high inflation in the early 1980s, said Tuesday that rising prices should again be a subject of concern for the U.S. economy.

Speaking before the Economic Club of New York, Volcker said today's economic conditions are not as severe as they were during his tenure, but still suggested caution about the threat of inflation. He also warned that the weak dollar is a major problem.

"We are at a point where we have to worry about [inflation]," said Volcker, who was appointed Fed head in 1979 by President Jimmy Carter before stepping down in 1987.

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This article addresses the former Federal Reserve Chief, Paul Volcker's statement that the United States should be aware and mindful of the continued rise in prices, and steps should be taken to combat this problem. His concerns included the threat of inflation and the weakness of the dollar. Volcker's statements simply reaffirm what many have begun to believe: the United States is facing an economic crisis, and something must be done to reverse or at least begin to change this. The leaders must lay aside any criticism they have received, and must focus on bettering the economy to get the United States back on its feet.

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A revolution at the Federal Reserve

Bernanke reinvents central bank to avoid catastrophe

The current financial crisis—perhaps the biggest since the Great Depression—has turned Federal Reserve Chairman Ben Bernanke into a reluctant revolutionary. The quiet academic who wanted to make the post of Fed chairman less heroic is leading a dramatic expansion of the central bank's role. In the process, he is setting the stage for the next big boom—or bubble.

In the short run, Bernanke is waging a war to keep the financial markets from collapsing. The biggest move so far: On Sunday, Mar. 16, the Fed brokered the fire sale of troubled investment bank Bear Stearns to JPMorgan Chase and announced that it would be willing to lend directly to major Wall Street brokers, which have never before had access to loans from the central bank.

The two moves represented a new level of direct Fed involvement in the financial markets and made it clear that Bernanke would take any step needed to prevent a financial catastrophe. These maneuvers should work, says Julian Jessop, chief international economist of London-based research firm Capital Economics. "At the end of the day, the Fed can provide a lot of support," he says. "It certainly won't prevent a sharp downturn, but it should prevent a debt deflation spiral."

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Are Bernanke's actions actually helping the economy? By helping the Bear Stearns financial corporation, he is just keeping the weak afloat. The mass surge of money he is pumping into the economy is simply increasing inflation; therefore, consumers and bankers are slow to release their own money because they know that they are paying more for things than they normally would. The picture is best displaying Bernanke in front of red because his actions

destroying the U.S. dollar like any foreign communist would do. His actions are far too extreme to render a stable economy immediately after this "R" word is over.

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