7  There is a very long literature that establishes the close link between public deficits and inflation, see Sargent and Wallace (1981), Sims (1994), Woodford (1994, 2001), and Catao and Teronnes (2003). For a discussion of fiscal deficits and hyperinflation, see Sargent (1982) and Dornbusch and Fischer (1986).
*  *  *  Chairman Shelby, Senator Sarbanes, and members of the Committee, I am honored to have been nominated by President Bush to be the Vice Chairman of the Board of Governors of the Federal Reserve System and grateful to this Committee for scheduling this hearing so expeditiously.