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Businesses that have gone through an episode of hyperinflation become understandably alert to the threat of it: at the first hint of inflation, they're likely to increase prices, since they've learned that if they don't, and inflation hits, their businesses will be wrecked.

The central focus of what we are doing at the Fed is to keep inflation from accelerating - and preferably decelerating.

They flooded liquidity in the marketplace but the mortgage rate is based much more on expectations of inflation. So if the average investor believes that there is inflation coming, they'll move that rate up.

The Fed is the biggest enemy of this economy. In fact, Ben Bernanke, as far as I'm concerned, he's public enemy No. 1. We're never going to have a recovery while this guy's in charge.

Of course, looking tough on inflation is part of any central banker's job description: if investors believe that inflation is going to get out of control, you end up with higher interest rates and capital flight, and a vicious circle quickly ensues.

Right now the long-term investors are telling us that they're not as concerned about inflation and so we're seeing these rates now move into the marketplace and out to the street - rates that individuals can get.

But clearly an economy that's growing and expanding like this one - and it certainly is doing that with high GDP output, employment numbers strong, capacity utilization strong - that's an environment in which the Fed needs to continually be alert to early signs of inflation.

It's going to be difficult to stimulate the real economy in the U.S. at a faster rate than 2 percent and perhaps even less if we have that fiscal cliff in December or January 2013.

I have never believed that central banks should have rigid inflation targeting. That is not a good thing to stabilize. There is nothing in economic theory to back this.