Dirty Harry on Central Banking

“You've got to ask yourself one question: 'Do I feel lucky?' Well, do ya punk?”

Dirty Harry wasn't talking to Ben Bernanke when he spoke those immortal lines, but perhaps he should have been.

Here is an editorial in today's USA Today:

Pity Ben Bernanke, the new Federal Reserve chairman. His predecessor, Alan Greenspan, had the good fortune of holding office when low energy prices and soaring worker productivity combined to make inflation a non-issue.

Bernanke, in contrast, barely had a chance to unpack his boxes before confronting rising inflationary threats. In the first four months of 2006, consumer prices rose at an annualized rate of more than 5%. That's a troubling increase from recent years.

The emphasis on fortune is exactly right: For Fed chairmen, being lucky is half the job, as I emphasized in an open letter to Ben Bernanke (now published in the May issue of the American Economic Review).