Yet Bernanke seems to possess some Keynesian baggage, using such nomenclature as "aggregate demand, " "core inflation, " "potential output" and "output gap, " as though the economy were made up of interchangeable parts.

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Earlier this year, staff at the Federal Reserve also marked down their estimate of the country's potential GDP and the output gap in response to the surprisingly steep drop in unemployment.

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In any case, so long as growth is below long-term trend, the gap between actual and potential output will continue to grow, easing inflationary pressure.

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An analysis by Martin Barnes, of the Bank Credit Analyst, finds that if America's growth performance is instead measured by the gap between actual and potential output, it looks much less stellar.

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However, the uncertainty about the valuation of asset prices is arguably no greater than the uncertainty about potential growth rates and hence the size of the output gap, which is at the heart of most central banks' inflation forecasts.

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Which is what leads to our interesting problem: the margin for error, the gap between the entire system working at full output and potential peak demand is going to be only 4% of that peak demand.

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