Can the anti-inflation reflex be tamed?

For Smith, that point might have come in early September. Bernanke had recently given his speech in Jackson Hole; a few days later, a new round of unemployment numbers was released, showing the jobless rate steady at 9.6 percent and more than six million people out of work for six months or more. With much of the debate about the economy dominated by political talking points, or by the idea that the recession’s pain represented some necessary sacrifice, Smith sounded a stark warning: “Rome,” he wrote, “is burning.”

The economy has gotten no stronger since then. But there have recently been signs that the debate is moving in the other direction. The 4% Club has added some new members. So has the Fed — in late September, the Senate approved two of President Obama’s nominees to the bank’s board of governors. Those new members of the central bank’s leadership may shift the internal debate. And there are increasing indications that the bank may take some action to increase the money supply at its next meeting in early November, although it will likely follow, The Wall Street Journal reported, a “baby-step approach.”

The most significant developments have come within the last two weeks, as two top Fed officials — William Dudley, head of the New York branch, and Charles Evans, president of the Chicago branch — have floated the possibility of an explicit, higher inflation target, at least in the short term. A Fed strategy keeping track of “inflation shortfalls” — and announcing that it plans to make up ground in the future — “would have some advantages,” Dudley said in a recent speech.

Given these shifts, some inflation advocates still hold out hope that the Fed’s instincts will yield to policy built to meet 2010 circumstances. Smith, at a loss just a month ago, is now guardedly optimistic. “It looks like we are winning this war,” he said late last week.

Nevertheless, the question of how much influence the Fed’s anti-inflation instincts will continue to exert remains open.  In his conversation with me, Ball had first outlined his fear that we will be stuck with 10 percent unemployment for a decade or more. Then, he quoted Bernanke’s phrase from memory: “It’d be nice,” he said, “if they could put aside their concern about inflation sufficiently to have Rooseveltian resolve in dealing with the recession.”