Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services.

The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis.

The basic prescription for preventing deflation is therefore straightforward, at least in principle: Use monetary and fiscal policy as needed to support aggregate spending, in a manner as nearly consistent as possible with full utilization of economic resources and low and stable inflation. In other words, the best way to get out of trouble is not to get into it in the first place.

Although low inflation is generally good, inflation that is too low can pose risks to the economy - especially when the economy is struggling.

Every effort needs to be made to try and offset the costs of Katrina and Rita by reductions in other government programs, especially those that are wasteful, duplicative and ineffective.

In fact, the world needs more nerds.

The Fed is totally open.