Bernanke On the Defensive

Perhaps due to essays like mine, Ben Bernanke is on the defensive asserting that the Federal Reserve "didn't throw savers under the bus" as it drove the Federal Funds rate to virtually zero. Bernanke cites unnamed economists who argue that the natural rate of interest has fallen over the past two decades. On the one hand, I suppose we should be thankful that Bernanke recognizes there is something like a natural rate of interest that is not controlled by the Fed. On the other hand, the idea that it is zero seems unlikely. In light of Austrian Business Cycle Theory, it is not true that holding the interest rate artificially low promotes a healthy economy. Here is another example of how Fed rhetoric does not match economic reality, the subject of my contribution to The Fed at One Hundred: A Critical View of the Federal Reserve System.