Sunday, June 11, 2017

Top Keynesian Economists are Calling for the Federal Reserve to Create More Price Inflation

A coalition of Keynesian economists, who hold the odd view that some price inflation can be good for an economy, released a letter Friday urging the Federal Reserve to change the criteria it uses to make its monetary policy decisions.

Specifically, the group, called "Fed Up," is advocating for a higher price inflation rate target than the current 2 percent level.

This doesn't surprise me. In the EPJ Daily Alert, I have regularly warned that the calls for an increase in the target rate would occur once the rate approached the current 2 percent target. On March 31, 2016, I wrote:
I have warned many times that the Fed will allow the price inflation rate to spike above the 2% target and justify a hot running price inflation rate as temporary.
We have now hit the 2 percent target as measured by the Consumer Price Index and other indexes are flirting with the 2.0 percent level.

Price inflation has generally been trending higher since the end of the oil price collapse. I expect it to climb higher unless the Federal Reserve attempts to vigorously fight price inflation with much more aggressive interest rate hikes. Something they are not likely to do, especially in the current Keynesian atmosphere of a desire for higher price inflation,

It should be noted that an economy grows when increases in productivity take place. This doesn't require any bizarre central bank money printing to" stimulate aggregate demand." Say's Law teaches us that there never is a problem of a lack of demand for goods. It is a myth.

The open letter of the Keynesians is here.


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