It is the economic news of the week that President Bush has appointed Ben Bernanke, B.Econ, Ph.D. as the new Chairman-designate of the Federal Reserve System. Mr. Bernanke - if approved by the Senate Banking Committee - will take over the powerful post from Alan Greenspan early next year. It is almost certain, albeit not guaranteed, that Mr. Bernanke will pass the Senate test. Once that happens, a new chapter will open up on how the Federal Reserve will steer the greatest economy on the planet and, by reflection, the economies of the leading industrialized nations. The purpose of this post is to explore what we can expect in the new Era of the Feds.

To those of us who make it a point to be updated on economic matters, Ben Bernanke is perhaps most famous for his paper entitled 'Monetary Policy and Asset Price Volatility' written in February, 2000, where Prof. Bernanke explores the implications of asset price volatility for the management of monetary policy. Bernanke is also famous for his comments on deflation (as opposed to inflation), a destabilizing period of falling prices, made in his two and a half years as a Fed Governor. Bernanke is best known for raising the novel concern that the U.S. economy could be devastated by the type of deflation that has crippled Japan for many years. In a November 2002 address to the National Economics Club in Washington,DC, Bernanke raised the issue and outlined a series of tools at the Fed's disposal for "making sure 'it' doesn't happen here" as he subtitled his speech. The