And it is our cross of gold also. Bernanke is hanging us all up there and that is all he can or wants to do.

And in Argentina the default investment hedge was stocks - or real estate. Anything except the currency. And the dollar is not doing all that well now either.

Lets just ask what happened with Argentina. Default and then inflation.

The one that really gets to me in Larry Kudlow. A standard republican thug. Him and John Taylor. I always wondered why my father hated the republicans. Now I know.

Aggressive optimistic job creation - to be done not by deficits but by cheaper money - by positive and higher inflation expectations - done by an optimistic Fed as demanded by an optimistic President. Lets hope we get these things. Roosevelt did them when he first came in. Obama could do so now.

This article, by Mike Woodford, might, or should, persuade the Fed to be more aggressive. He is, of course, a friend and co-author with Bernanke. http://www.newyorkfed.org/research/staff_reports/sr404.html "Conventional and Unconventional Monetary Policy." Woodford shows that, in a buttoned down New Keynesian model, a forward looking inflation target, such as the Fed is using now, is a very bad idea. A price level target is much better. An inflation target bakes the past deflation into the price level - as we are now seeing. See pages 31-37. A stated price level will create the positive feedback and avoid the negative cycle that is so evident now. And this is Mike Woodford saying this – a man who is the recognized expert on central banking and monetary policy. This is an approach the cautious people at the Fed could actually endorse - and they sure should.

There is also this paper, from Vasco Cúrdia and Michael Woodford - Conventional and Unconventional Monetary Policy Its at the NY Fed. http://www.newyorkfed.org/research/staff_reports/sr404.html Woodford is a New Keynesian theorist - and he literally wrote the book on good central bank policy. He is a moderate and cautious man - speaking in careful tones - to moderate and cautious central bankers - and shouting the alarm just as loud as he can. He shows that in a canonical New Keynesian model, price level targeting (similar to that proposed by Sumner), not inflation rate targeting, is by far the better policy when coming out of a crisis such as this one - for exactly the reasons you say. Going back to inflation targeting just as soon as possible bakes the deflation into the price level and leads to disastrous deflationary expectations and much worse outcomes. To quote from the paper: begin quote In the case considered, if the financial disturbance were never to occur, optimal policy would involve maintaining a zero inflation rate, as this would also imply a zero output gap in every period. After the disturbance dissipates, one of the feasible policies is an immediate return to this zero-inflation steady state (under the parameterization assumed in the figure, this involves a nominal interest rate of 4 percent), and this is optimal from the point of view of welfare in all of the periods after the financial disturbance dissipates. It is not, however, possible to maintain the zero-inflation steady state at all times, because during the financial disturbance this would require the policy rate to equal minus 2 percent, which would violate the zero lower bound. One of the policies considered in the figure (the dashed lines) is strict (forward-looking) inflation targeting: the central bank uses interest-rate policy to maintain a zero inflation rate whenever it is not prevented by the zero lower bound on the policy rate; and when undershooting the inflation target cannot be avoided, the policy rate is maintained at the lower bound. The other policy (the solid lines) is the optimal Ramsey policy, when the zero lower bound is included among the constraints on the set of possible equilibria. The forward-looking inflation targeting policy is clearly much worse, as it involves both a much more severe output contraction and much more severe deflation during the period when the zero bound constrains policy. The problem with the forward-looking inflation targeting policy is that because the central bank simply targets zero inflation from the time that it again becomes possible to do so, all of the deflation that occurs while the zero bound binds is fully accommodated by the subsequent policy: the central bank continues to maintain the price level at whatever level it has fallen to. This results in expected deflation during the entire period of the financial disturbance, for deflation will continue as long as the financial disruption continues, while no inflation will be allowed even if the disturbance dissipates; this expected deflation makes the zero bound on nominal interest rates a higher lower bound on the real policy rate, making the contraction and deflation worse, giving people reason to expect more deflation as long as the disruption continues, and so on in a vicious circle. end quote As I said, this is Mike Woodford who wrote this - and if there is any theorist a modern and cautious central banker can (and should) listen to, it is him. He is entirely clear - and Yellen is really really wrong. The Obama administration does have the theory it needs from this paper. Would that would use it! If Obama does he will likely get another term. If we are still at 10% unemployment or so when he is running again he is toast. And so are we.