See Update I, below.
The rationale is that the United States’ economy is circling the deflationary drain—something Bernanke and the Fed are absolutely terrified of. Certainly deflation is hitting the U.S. economy full bore, but it’s yet to be proven that this deflationary trough has twisted itself into a self-reinforcing vicious cycle. I would argue that the chances of the U.S. economy twisting into a deflationary death spiral has yet to be made. But be that as it may, it doesn’t matter if the economy is in a deflationary death spiral—Bernanke and Co. think that that’s the imminent danger. And they're the ones with their finger on The Big Red Money-Making Button.
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