A year after being appointed a member of the Board of Governors of the Federal Reserve, Ben Bernanke, a top contender to replace long-term Fed chairman Alan Greenspan at the time, revealed his ideas on how best to run the central bank in Institutional Investors November 2003 issue.
In Rethinking the Fed, Senior Writer Deepak Gopinath detailed how Bernanke would define the post-Greenspan era, recounting the future Fed chairmans view on how the central bank would fight postbubble deflation risks: He sought to reassure the markets that the central bank would not be impotent to act against potentially falling prices, even with interest rates already approaching record lows. The U.S. government, Bernanke pointed out, has a technology called a printing press. Gopinath also noted that the Fed had unconventional tools . . . to keep deflation at bay, such as lending directly to banks, engineering a fall in the dollar or buying up long Treasury bonds.
His words proved prescient. Six years later, under the stewardship of the recently renominated Bernanke, the Fed has unleashed the printing presses, expanding its balance sheet from $894 billion at the end of 2007 to more than $2 trillion.