A Rebellion at the Federal Reserve? (Must of read Krugman)

The Atlantic ^ | May 2, 2012 | Matthew O'Brien

[C19fan]

Chicago Federal Reserve president Charles Evans doesn't look the part of a heretic. But in the cozy, conservative club that is central banking, he certainly qualifies. While most of his colleagues at the Fed have recently taken an even more hawkish turn, Evans remains a champion of additional monetary stimulus. And on Tuesday he took an even bigger step: He became the first sitting Fed member to endorse nominal GDP (NGDP) level targeting.

Sounds wonky? It is. But here's why Evans' suggestion is also extremely bold. The Fed famously has a dual mandate: It's supposed to promote the maximum level of employment consistent with its two-percent inflation target. In reality, this dual mandate often looks more like a single inflation mandate. NGDP level targeting would do away with this problem by rolling the mandates together. And right now, that would mean a much more aggressive Federal Reserve.

[C19fan]

Be prepared to get out of longer term bonds now. This would be the ultimate bailout of debtors.

[NeoCaveman]

The Fed famously has a dual mandate: It's supposed to promote the maximum level of employment consistent with its two-percent inflation target.

No. Part of the dual mandate is stable prices. Two percent inflation is not stable prices. Your money losing half its value in 36 years is not stable prices.

[Misterioso]

Must of . . . ???

[KarlInOhio]

Finally, a third group is worried that if the Fed doesn't print more money, there won't be enough inflation to keep the economy healthy. Evans belongs to the last camp.

I thought the stagflation of the 1970s and the low inflation growth of the 1980s had finally killed the Pillips curve. Inflation is not a sign of a healthy economy. In fact, the natural state of the economy is slightly deflationary to match the increase in productivity. One dollar should be able to buy a little more in ten years than one dollar today because people will be more productive on average. Anything above that is a sign that those controlling the printing press are skimming some unearned income from the economy.

[dangus]

“Must of?”
Really?

[allendale]

Whether it be the EPA, the Dept. of Energy, or the Fed, it is clear that appointed ideologues have great power and are harming the American people. This ceding of major policy decisions to the unelected and unaccountable is a serious flaw in our republic.

[dagogo redux]

Amen.

[ProtectOurFreedom]

It's the old 1930s theory that, if people and businesses anticipate coming inflation, they'll go out now and spend like mad, boosting GDP. It has never worked.

[WashingtonSource]

Matthew O’Brien is a economic illiterate, to start with. He’s also cheerleading an idiot (Charles Evans) who looks the part, BTW, and who wants to reignite inflation. It’s a leftist Keynesian screed, to be sure.

[monocle]

Do you seriously believe that the Congress or comrade Obama would do a better job?

[KarlInOhio]

Two percent inflation is not stable prices. Your money losing half its value in 36 years is not stable prices.

I had an economics professor who stated that the economy can handle any constant, predictable rate of inflation or deflation except for two sticking points: physical currency being excluded from the nominal growth or shrinkage of values and taxes being charged on gains that come strictly from inflation. Other than those an economy could handle 100% inflation just so long as it was predictable. But of course the "other than that" is similar to saying "other than that Mrs. Lincoln, how was the play".

[pabianice]

The Fed is and has been a disaster. It is the only employer in the U.S. that can and does punish employees if they get sick or injured on the job.

[KarlInOhio]

When I took econ in the mid to late 80s, the Phillips curve was still in the text books but in the lectures it was treated as a historical theory that had been overwhelmed by new evidence like luminiferous ether in physics or Lamarckian inheritance in biology. It looks like it is either coming back, or at least those who think they can profit (either monetarily or in power) from running the printing presses at ludicrous speed are digging it back up.

[Stentor]

Do you seriously believe that the Congress or comrade Obama would do a better job?

So if the trains run on time and you get a good cocktail in the bar car, nothing else matters?

[Maceman]

(Must of read Krugman)

Must have read. Must HAVE read, not must OF read.

We are letting you off with a warning this time, but next time you may not be so lucky.

(Signed)
The FR Grammar Police

[RatRipper]

All the stimulus and quantitative easing in the world will not work when regulation is overwhelmingly oppressive and the Federal government is holding a gun to the heads of American small business with the combination of heavy-handed regulatory enforcement and excessive taxation.

Mr. Evans is applying academic theory to a street fight. He needs to come out of his castle and try to understand the reality of what is happening to folks on the street.

[Mr. Lucky]

Must of got up on the wrong side of the bed.

[Mama Shawna]

(Must of read Krugman) Must have read. Must HAVE read, not must OF read. We are letting you off with a warning this time, but next time you may not be so lucky. (Signed) The FR Grammar Police

THANK YOU! That drives me nuts.

[tbpiper]

if the Fed doesn't print more money, there won't be enough inflation to keep the economy healthy

I'll meditate on that next time I buy (fewer)groceries.

[Maceman]

Must of got up on the wrong side of the bed.

Well, certain basic grammatical errors just jump off the page at me and are distracting.

I was taught that if you can't write clearly, you can't think clearly, and I believe that. "Must of" makes no kind of logical sense at all.

Plus, substituting "must of" for "must have" makes a writer look like a major looser.

(Ha-ha, you thought I spelled "loser" incorrectly, but I'm just messin' with ya.)