Friday, December 27, 2019

Fed Chairman Wants Higher Price Inflation

Fed chairman Jay Powell and the Fed Money Pumpettes have no understanding of the nature of price inflation.

First, there is no reason to want any price inflation. You have to be thinking in a Salvatore Dali mode to think price inflation is needed "to get the economy going."

Second, the idea that price inflation is going to climb in some simple linear fashion has no basis in theory or history. Fed members are shallow thinkers to the degree they hold this view.

As I point out in the EPJ Daily Alert, the Fed is not going to get concerned about inflation until it hits 3% but by then the Fed would have to raise short-term rates to around 5% to choke off the inflation and they are not going to do that in the short term. The failure to grapple quickly with 3% inflation could result in it rapidly spiking to 5% (as measured by government price indexes) and then we are off to the races.

The Fed is pretty much run by a group that has economic understanding only a notch above Gideon Gono.



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