This is a transcript from yesterday's Congressional testimony. Note that Bernanke admits that if the Fed puts the interest rate at the "wrong place" then "that would have negative impacts."
Ron Paul: Does the Federal Reserve contribute to the business cycle?
Bernanke: It has. It has at times ....
Ron Paul: Does excessive credit and artificially low interest rates cause malinvestment?
Bernanke: The question is, [what] is the judgment as to where interest rates ought to be? Of course we have a mandate for maximum employment and price stability and we try and balance those obligations. So we could make mistakes and put the interest rate at the wrong place and that would have negative impacts, I agree. So we are doing the best we can to find the right place to put the interest rate, the one that's consistent with the neutral rate, the rate that establishes a full employment economy.
Ron Paul: And some day we may try the market to determine the interest rates. Thank You.
Fake Ben Bernanke
FakeBen.com
FakeBen is a blog to monitor the Fed and its actions and encourage community participation. At FakeBen, we believe that the Fed policy of the last two decades has created a credit bubble as large as that created in the 1920s. This bubble will lead to either inflation, a recession, or both.
