An interview with Professor Tcherneva on Bloomberg radio’s The Hayes Advantage.
In his scholarly work Bernanke has clearly stated that governments like those in the U.S. and Japan (but unlike those in the European Union) do not have a solvency problem.
He also seems to understand that only fiscal policy produces net new financial assets in the private sector. By contrast, purchases of government securities by the Fed only replace interest-earning financial assets (bonds) with non-interest earning assets (reserves), leaving the net wealth position of the private sector unchanged. For this reason, Bernanke has argued that monetary policy is effective in deflationary periods mainly because of its fiscal components. In other words, the central bank can and should finance whatever size government spending is necessary to bring the economy out of a recession.
