Raising the Inflation Target – It’s Temporary, I Promise
by Chris Marcus
Gold Money
Recently several Federal Reserve governors have talked about the supposed benefits of “temporarily” raising the Fed’s target rate of inflation. The Fed has traditionally maintained an informal inflation target of 2%, and now they’re considering higher levels in an effort to reduce the unemployment rate. It’s a misguided strategy – for the simple reason that increasing inflation does not create economic growth. But there are also several other concerns with the discussion of inflation targeting.
The Fed has a dual mandate from Congress to promote price stability and maximum employment. The Fed already defines stable prices as prices that rise by 2% a year, but now they are concerned that 2% is not enough. What is the process in place to determine what the correct amount is and what is too much? The Fed designs plans like QE or Operation Twist and often just seems to hope for the best. There would have to be some cost to a greater rate of inflation, otherwise if more inflation is better then why not raise it to 10%? Or 20%? There is never any debate about measuring the costs or looking back at the results of the past inflationary policies that haven’t worked.
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2012-10-30 10:00:31
Source: http://financialsurvivalnetwork.com/2012/10/raising-the-inflation-target-its-temporary-i-promise/
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