Test of nerves http://www.economist.com/finance/displaystory.cfm?story_id=13527921 The monetary-policy maze http://www.economist.com/displaystory.cfm?story_id=13527329 âMr Bernanke and his predecessor, Alan Greenspan, argued before the crisis that bubbles are hard to identify before they burst. Pricking them is even harder without wrecking the economy. Central banks should act only if bubbles threaten price stability; otherwise, they should wait and clean up after they burst. The shallow recession that followed the tech-stock boom of the late 1990s seemed to vindicate them.â VERY INTERESTING Eric Rosengren, president of the Federal Reserve Bank of Boston, noted recently that the Fed has hit, or all but hit, the zero limit twice this decade. That is more often than earlier simulations had indicatedâand it suggests higher inflation targets should be considered. Another proposal is that central banks aim at a path for the price level rather than the inflation rate. Suppose that this path rose by 2% each year. Then after deflation of 1% in year one, the central bank would aim for inflation of more than 2% in later years (inflation of 5% in year two, say) to bring prices back up to the target. Greg Mankiw, a Harvard University economist, goes further, suggesting that inflation simply be given lower priority. âThere are worse things than inflation,â he says. âWe have them today.â VERY VERY INTERESTING Baptism on Fire http://www.economist.com/world/unitedstates/displayStory.cfm?story_id=13527847&source=features_box1 Mr Geithner presented a comprehensive explanation of the causes of the crisis, his response, the state of the economy and regulatory reform. But impatient panellists wanted to focus on whether banks were getting too sweet a deal. âHow does protecting Citiâs common shareholders at the expense of taxpayers benefit our economy?â one demanded. UMMMMMMMMMMMM The worst thing for the world economy would be to assume the worst is over http://www.economist.com/opinion/displaystory.cfm?story_id=13527685 Start preparing for the next decade Welcome to an era of diminished expectations and continuing dangers; a world where policymakers must steer between the imminent threat of deflation while countering investorsâ (reasonable) fears that swelling public debts and massive monetary easing could eventually lead to high inflation; an uncharted world where government borrowing reaches a scale not seen since the second world war, when capital controls ensured that savings stayed at home.