Will the cure be worse than the disease?

http://money.cnn.com/2008/01/18/news/economy/cure.fortune/index.htm?postversion=2008012107

...Bernanke is risking a disastrous replay of the 1970s, when high oil prices fueled double-digit inflation. Every time the Fed started to tighten and unemployment jumped, chairmen G. William Miller and Arthur Burns lost their nerve. They lowered rates to boost job growth, and inflation inevitably revived, causing a vicious price spiral. The Fed let the disease rage for so long that it took draconian action by chairman Paul Volcker in the early 1980s to finally defeat inflation. The price was a deep recession, with unemployment hitting 11% in 1982...

...So if inflation is really expected to rage, why aren't interest rates far higher? The explanation is twofold. First, government bonds are hardly a foolproof forecaster. For example, five years ago Treasury yields were predicting 2% inflation over the next five years, and the actual figure was 3%, or 50% higher. Second, investors are so skittish about most stocks and corporate bonds that they're paying a huge premium for safe investments, chiefly U.S. Treasuries...