Mr. Bernanke tried hard and succeeded partially in deflecting criticism from the Federal Reserve’s Quantitative easing programme. But, he was conveniently ignoring some issues which were not that easy to defend. He is right about capital flows into emerging markets being a consequence of better growth over there and inferior growth prospects in the developed world. In other words, with or without QE, capital flows to developing nations would have happened. QE might have been an incremental factor.
But, what is harder to defend is the impact of the expected and actual QE programme on commodities prices that are denominated in US dollars. They have risen a lot more than they would have. Well, I do not have to waste my breath on this. He can read James Hamilton’s blog post. Nor has Mr. Bernanke provided a good response to Mr. Richard Fisher’s speech.