Congress directs the Federal Reserve to:
maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates...
The Burns and Miller Feds of the 1970s did not take the "stable prices" part of this mandate seriously. Today's Federal Reserve does not take the "maximum employment" part of this mandate seriously.
Paul Krugman raves:
Profiles in Fed Cowardice: The Fed predicts disastrously high unemployment as far as the eye can see.... And in response to this dire prospect, it declares its work done. Notice that the Fed does not buy into the notion that there has been a large rise in the structural rate of unemployment, that 9 percent is the new normal. That stuff off to the right, labeled “longer run”, is in effect the Fed’s estimate of how low unemployment could and should go without causing inflation problems. So the Fed agrees that something should be done to greatly increase demand. But it washes its hands of the problem, even though Bernanke and his colleagues are well aware that nobody else will act.
I’m aware that there are doubts about how much the Fed could accomplish; I share those doubts. But that’s no reason not to try.
This display of passivity is awesome. And it’s shameful.
Those of us Democrats who were happy when Barack Obama reappointed Ben Bernanke as Fed Chair thought that we were getting the Ben Bernanke we knew--the student of the Great Depression and of Japan's Lost Decade dedicated to doing whatever was necessary to stabilize the time path of nominal GDP, up to and including dropping bales of money out of helicopters.
Whatever happened to him?