Chairman Alan Greenspan and the other members of the Federal Reserve Board put on their caped crusader outfits Tuesday and did battle against inflation by kicking up short-term interest rates one-quarter percent. The move will up monthly payments on credit card and home equity debt even while it comforts those on fixed incomes.

Greenspan gets two more chances to raise rates before he retires in January and hands the job over to Ben Bernanke, an ex-Princeton professor. In his new job, the professor will head the Central Bank, which has more to do with making or preventing inflation than any other single entity.

The last time a professor of economics was installed as chairman of the Federal Reserve Board, in 1970, the country went to hell. The nation drowned in an inflationary decade that washed away jobs, businesses, life savings and the futures of millions. Arthur Burns, the Columbia University professor President Richard Nixon appointed, entered office with credentials more impressive than Bernanke’s and left having swamped the country with cheap money, rising prices and turmoil. That does not mean Bernanke will do the same.

Just as with Supreme Court judges, you don’t know what Fed chairmen will do until they’ve done it–and even then you may not know. That’s the case with Greenspan, who is supposed to have kept “inflation in check” and yet is leaving with prices rising at a rate of almost 5 percent per year. And today the Commerce Department substantiated the impact on wages and prices we all expected from the Gulf Coast hurricanes. And interest rates are expected to rise accordingly.

Since few of us get yearly 5 percent raises, the government has come up with a number to make us feel less squeezed while we struggle to come out even at the end of the month. This is the “core rate” of inflation, meaning what things cost us after food and fuel have been taken out of the equation.

Those items are eliminated from calculation because their prices bounce up and down a lot or are “volatile.” Bouncy prices “distort” the inflation figures and therefore should be disregarded, although at the gas station, bouncy or not, you pay.

Disregarding food and fuel makes sense for those of us who don’t eat, don’t drive and don’t need to heat or air-condition our homes. It makes sense, too, for canoodling politicians who can claim inflation is being “tamed.”

At the moment the core rate of inflation is 2 percent. Two percent inflation over ten years will destroy about 20 percent of your nest egg’s spending power.

The slop-over effects from rises in fuel price can be seen on TV, where Christmas ads arrived before Halloween this year. Once the first winter heating bills come in, retailers fear that shoppers won’t have enough money left over to buy a lump of hydrocabon for the kids’ stockings.

The consumer price index should express the cost of living, the totality of all prices or what a dollar will buy this year compared to last year. Given the millions of items we buy and services we pay for, an index is difficult enough to construct without playing games.

Bernanke arrives on the job known for believing that the Fed should have an inflation target, between 1 and 2 percent, and then hit the bull’s-eye by manipulating interest rates. But can he?

Some do not think the Fed has the power to control prices by itself when foreign businesses and American debt to foreigners figure so large in our affairs. Businesspeople like Jim Grant, who has made a career of staying outside the box and dancing on top of it, thinks Bernanke has it simply wrong. The day Bernanke’s appointment was announced, the stock market leaped up in an act of faith. Wall Street people, with all their algorithms and statistical models, are a credulous bunch in hysterical need of someone to believe in. For the past eighteen years they have given their trust to Greenspan through bubbles, crashes, recessions and now inflation. The insecure, superstitious millionaires are in the process of transferring their commitment to Bernanke.

Should Bernanke stumble, there is one last line of defense against inflation–us. Workers, employees and professionals may have such weak bargaining power they cannot force the wage increases to keep up with inflation. As they fall behind they lose purchasing power and must buy less, which will reduce the pressure on prices. The inflation ends, Bernanke is hailed as the new Alan Greenspan and the rest of us, poorer in pocket but richer in experience, try to catch up as best we can.