Explaining Bernanke's answer
In case you missed it, here is the question, answer and various links. So, what's going on?
Bernanke, the preeminent economist, has turned banker. (Or, to be more precise, he is acting banker because this is what is expected of him. I read his answer as 'I know better, but I operate within constraints'. Time man of the year or whatever, Bernanke does not single-handedly set monetary policy - far from it.)
The distinction is simple. The economist wants to return the economy to trend growth and reduce unemployment. Inflation is important, but it's no holy grail.
The banker, on the other hand, just wants inflation to be low so that the real value of debt does not fall. And that's basically it.
The Fed is completely captured by bankers. Forget about bonuses, bankers are screwing the economy by controlling the intellectual climate and policy apparatus so that inflation stays low - too low.
And by the way, a very similar question was put to the Governor of the Bank of England about a month ago - scroll down to question 49.
