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Bernanke Proposes “Price-Level Targeting” Before Next Crisis, Admits There May Be A Problem

Having taken a four month hiatus from blogging, Citadel advisor and former Fed chair Ben Bernanke penned another article on his Brookings blog in which he discusses a familiar subject: that the Fed has run out of tools, a problematic reality which would be exposed by the next financial crisis, so in advance, Bernanke proposes an even more unorthodox monetary policy: price-level targeting.

Pointing out the obvious, namely that as a result of the bursting of the last Fed-created bubble, the US economy remains mired in “low nominal interest rates, low inflation, and slow economic growth” which “pose challenges to central bankers”, central banks may want to consider temporary price-level targeting, or PLT, as Bernanke is “no longer confident” that the Fed’s “current monetary toolbox would prove sufficient to address a sharp downturn.” …

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