Alan Greenspan's Practice Of Inflation Targeting

When times are good everyone trusts the word of the chairman of the Federal Reserve. During the boom of the beginning of this decade the word of Alan Greenspan was golden. The old adage "if it aint broke, don 't fix it" seemed to apply to the reappointment of Alan Greenspan at each election season. Even when a democratic president left office, he was reappointed by the incoming Republican president rather than being replaced by a republican counterpart. Alan Greenspan controlled the economy during the booming 90 's into the declining economy of the early 00 's. His term from 1987 to 2006 is truly unprecedented. He had his finger on the pulse of the economy from the beginnings of the dot-com boom into the post 9-11 world. He maintained most of his control of the economy implementing his practice of "inflation targeting".

Inflation targeting is a monetary policy tool in which Greenspan would attempt to control the rate of inflation. The Federal Reserve would release to the public a predicted rate of inflation which would be best to grow the economy at a steady rate. If the rate of inflation was growing too quickly, the Federal Reserve would raise the short-term interest rates. This raise in short-term interest rates would control the money supply or Aggregate Supply of Funding. This would
Bernanke was previously Chairman of the U.S. President 's Council of Economic Advisers, and member of the Board of Governors of the Federal Reserve, serving from August 2002 until just prior to his June 2005 swearing-in as CEA chairman. One of the philosophical differences between Greenspan and Bernanke is that Beranke believes that a minimal level of inflations is preferred. Now that he is at the helm of the Federal Reserve, and the growth of the economy is a lot more concerning people are questioning the decisions being made by the new chairman. He is being criticized a great deal more than Greenspan ever