Bernanke_PriceStability_20Speech - FRB: Speech,...

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FRB: Speech, Bernanke--The Benefits of Price Stability--February 24, 2006 .. 1 of 9 11/22/2006 1:45 PM Remarks by Chairman Ben S. Bernanke At The Center for Economic Policy Studies and on the occasion of the Seventy-Fifth Anniversary of the Woodrow Wilson School of Public and International Affairs, Princeton University, Princeton, New Jersey February 24, 2006 The Benefits of Price Stability It is a great pleasure for me to return to Princeton today, to see so many friends and former colleagues, and to help celebrate the seventy-fifth anniversary of the founding of the Woodrow Wilson School of Public and International Affairs. I taught at Princeton for seventeen years--more often than not in Bowl 1, in the deep, dark basement of Robertson Hall--and my wife Anna and I raised our two children here. Like all good New Jerseyans, we will always think of our home address in terms of a Turnpike exit--in our case, Exit 9. As you know, the Woodrow Wilson School is named after a renowned Princeton professor of politics and law who, having determined from a stint as the University's president that the institution was essentially ungovernable, decided to try his hand at public service. I do not presume to draw any comparisons between myself and the nation's twenty-eighth President, of course; but besides the Princeton affiliation, we have in common a connection with the Federal Reserve System. President Wilson made the establishment of the Federal Reserve one of his early legislative priorities, signing the Federal Reserve Act into law in December 1913, less than a year after taking office. Wilson helped to negotiate the complex political compromises that finally gave the nation a permanent central bank, following two earlier failed attempts. To simplify a complex history, earlier attempts to stabilize the monetary arrangements of the United States had frequently been roiled by perceived conflicts of interest between (on the one hand) the farmers and tradespeople of Main Street America, who believed that they were most advantaged by policies of easy credit, and (on the other hand) the financial barons of Wall Street, who, as creditors and bondholders, preferred "hard-money," low-inflation policies. Recognizing that all parties would be served by a central bank that could help contain the periodic financial crises that afflicted the U.S. economy, Wilson worked with the Congress to develop a structure for the central bank that finely balanced competing interests and concerns. In particular, the Federal Reserve was given a regional structure, with twelve Reserve Banks that were distributed around the country and were empowered to represent sectional interests and to respond to local conditions. Although Wilson understood the political and practical advantages of decentralization, he also resisted some powerful proponents of a completely decentralized system by supporting the creation of a Board of
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Bernanke_PriceStability_20Speech - FRB: Speech,...

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