Powell Is Concerned About Dots

Two Mistakes Better Than One

In the above paragraphs, Powell discusses a possible need to purposely err in the opposite direction if the Fed cannot hit its inflation target.

In short the Fed says two mistakes may be better than one.

I believe the average third grader could understand the complete silliness of such a discussion, but economic wizards live in Fantasyland where normal observations occur.

Instead of discussing such obvious silliness, the Fed ought to step back and consider a simple set of facts.

Four Simple Facts

  1. There is no economic benefit to inflation.
  2. Even if there was a benefit, there is no way to know what the target should be. Why 2% and not 1% or 0%?
  3. Even if one could magically divine a proper target, the Fed would be constantly chasing its tail playing catch up top the markets.
  4. Finally, there is no way to properly measure inflation in the fist place because the Fed does not see asset bubbles as the direct result of its inflation policy.

Repeated bubble blowing episodes that benefit only the bankers and asset holders is proof enough of how piss poor Central bank policy has become.

My Challenge to Keynesians “Prove Rising Prices Provide an Overall Economic Benefit” has gone unanswered.

Also note that the BIS did a historical study and found routine deflation was not any problem at all.

“*Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive,*” stated the BIS.

It’s asset bubble deflation that is damaging. When asset bubbles burst, debt deflation results.

Central banks’ seriously misguided attempts to defeat routine consumer price deflation is what fuels the destructive asset bubbles that eventually collapse.

For a discussion of the BIS study, please see Historical Perspective on CPI Deflations: How Damaging are They?

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Sensible Cents 1 year ago Member's comment

And what about figures 1 and 4? Where are those?