Neel Kashkari, Minneapolis Fed President, sent out this tweet yesterday in response to former Federal Reserve Bank chairman Paul Volcker's statement that “A 2 percent target, or limit, was not in my textbook years ago. I know of no theoretical justification.”
Only a Fed official could be confused by Volcker's clear statement. That is, there is nowhere in the sound textbooks that says there should be any price inflation target. This was Volcker's point, not that there should be a "know it when we see it" target.I am confused by this article. Is Mr. Volcker arguing for a higher, lower or no inflation target? And if he wants no target, just "know it when we see it", isn't that basically arguing for a higher effective target, since it will be more subjective? https://t.co/6wqx0L99Fm— Neel Kashkari (@neelkashkari) October 24, 2018
Volcker's was making clear that there is no sound theoretical underpinning to justify the Fed aiming at creating any price inflation.
-RW
It reminds me of a quote I think I saw here a couple years ago when the Russians were trying capitalism but one of them said something like " I understand capitalism is better but who decides, for instance, how much corn to grow"
ReplyDeleteAnd I told that Russian that individuals making tveor own subjective decisions decide how much they are going to grow (or not grow) and them try to sell, trade or or consume what they produced with other individuals subjectivelu deciding what to buy or consume. But there is no one human mind or committee deciding how much corn to grow. Yet it is decided... !
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