I'm continuing to think of my earlier comment on the contradictory mandates of the Federal Reserve. If the Fed had a mascot, it should be the pushmepullya, the imaginary animal of Dr. Doolittle.
Central banks will fail to control inflation and could even push price growth higher unless governments start playing their part with more prudent budget policies, according to a study presented to policymakers at the Jackson Hole conference in the United States.
Reporting by Balazs Koranyi; Editing by Paul Simao
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Above from Reuters. It backs up your dodo bird imagining. How could an honest person pretend to "do the right thing" while serving as a board member?
"Never mind that an actual inflation target is nowhere in the Fed’s actual mandate."
I'll respectfully disagree with you on this point. Half the Fed's mandate is "stable prices". Personally, I think that means they should target an inflation rate of 0%, at least over the long term, since even 2% inflation has a drastic effect on prices (and the value of the currency) over a span of decades, such as a typical person's working career of 40-odd years.
Targeting an inflation rate of 0% would be tantamount to declaring open warfare on price discovery mechanisms. Prices need to be able to fluctuate to reflect constantly shifting market conditions.
The 2% regime is actually an artifact of the Greenspan era, as then Fed Chair Alan Greenspan figured that when inflation was below 2% it ceased to play a significant role in people's spending and saving patterns.
Well, I did say, "over the long term". Sometimes prices will rise, sometimes they will fall, if for no other reason than credit expansion and contraction in the private sector. But averaged over a span of decades, the total change should net out to zero. That is pretty close to what we had before the Federal Reserve existed. Even after the Fed was created, we still had a modicum of long-term price stability while the Fed was constrained by the Dollar being tied to a real, physical asset. Endless deficit spending and long-term inflation only became possible when that tie was severed.
I'm continuing to think of my earlier comment on the contradictory mandates of the Federal Reserve. If the Fed had a mascot, it should be the pushmepullya, the imaginary animal of Dr. Doolittle.
It's certainly true that the Fed has been unable to manage one mandate, let alone balance two of them.
But I figure the mascot should be the dodo bird. A species doomed to extinction.
So you think the Fed is going to go away? I don't see that happening, except perhaps as a result of a complete economic collapse.
At some point, a pure fiat money scheme runs out of credibility.
We may be seeing the first signs of that in China, with their housing crisis that Beijing simply cannot contain.
Something similar happened with the Soviet Union. They just ran out of wealth.
Unless there is a sea change in US monetary policy, yes, the Fed is doomed to extinction. It won't happen tomorrow, but it will happen.
Central banks will fail to control inflation and could even push price growth higher unless governments start playing their part with more prudent budget policies, according to a study presented to policymakers at the Jackson Hole conference in the United States.
Reporting by Balazs Koranyi; Editing by Paul Simao
........
Above from Reuters. It backs up your dodo bird imagining. How could an honest person pretend to "do the right thing" while serving as a board member?
Panem et circenses.
It's been the bane of prudent government spending policy since Juvenal.
And it's why government will never "do their part".
Fiscal prudence is simply not in a politician's best interests, nor a bureaucrat's.
Which is why fiat regimes lose credibility. Once too many promises get broken, it's game over.
"Never mind that an actual inflation target is nowhere in the Fed’s actual mandate."
I'll respectfully disagree with you on this point. Half the Fed's mandate is "stable prices". Personally, I think that means they should target an inflation rate of 0%, at least over the long term, since even 2% inflation has a drastic effect on prices (and the value of the currency) over a span of decades, such as a typical person's working career of 40-odd years.
Targeting an inflation rate of 0% would be tantamount to declaring open warfare on price discovery mechanisms. Prices need to be able to fluctuate to reflect constantly shifting market conditions.
The 2% regime is actually an artifact of the Greenspan era, as then Fed Chair Alan Greenspan figured that when inflation was below 2% it ceased to play a significant role in people's spending and saving patterns.
Well, I did say, "over the long term". Sometimes prices will rise, sometimes they will fall, if for no other reason than credit expansion and contraction in the private sector. But averaged over a span of decades, the total change should net out to zero. That is pretty close to what we had before the Federal Reserve existed. Even after the Fed was created, we still had a modicum of long-term price stability while the Fed was constrained by the Dollar being tied to a real, physical asset. Endless deficit spending and long-term inflation only became possible when that tie was severed.