Mr Bernanke told the House today that he was open to further easing of interest rates. Well that’s a shock. And that avoiding recession was more important than avoiding inflation.

Why?

Recession temporarily reduces incomes and consumption as consumers rebuild their savings. Malinvestment is written off and productive investment eventually resumes. Inflation, on the other hand, steals from everyone, permanently, in the same way governments have been debasing the currency since classical times. Recessions are a necessary and healthy element of the business cycle and trying to avoid them by creating one credit bubble after another will eventually end in disaster. Either Zimbabwe-like inflation, or Depression-era deflation. It is probably too late to have just a mild recession to get savings, consumption and investment back into reasonable proportion. But maybe not. Economics isn’t a science, after all.