What do they smoke in DC?
Furman’s illogical proposal exemplifies the erroneous thinking in the economics profession in general and at the Federal Reserve specifically. For example, the “natural” inflation rate is below zero, i.e., deflation. Thus, the Fed’s policy goal to target a 2 percent inflation rate is fatuous.
As Murray Rothbard pointed out, “rather than a problem to be dreaded and combatted, falling prices through increased production is a wonderful long-run tendency of untrammelled (sic) capitalism.
https://murraysabrin.substack.com/p/obamas-chief-economist-wants-more
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“There is a right way and a wrong way, always choose the right way.” Abraham Sabrin (1914-2001)
Jason Furman was Obama’s chairman of the Council of Economic Advisers (2013-2017) and is currently a professor of the practice of economic policy at Harvard. In an Wall Street Journal op-ed yesterday, “The Fed Should Carefully Aim for a Higher Inflation Target,” Furman asserts, “In the short run, the Fed should be aiming to stabilize inflation below 3%. If it can achieve this goal, then it should shift to a higher target range for inflation when it updates its overall strategy around 2025” (emphasis added.)
Furman’s illogical proposal exemplifies the erroneous thinking in the economics profession in general and at the Federal Reserve specifically. For example, the “natural” inflation rate is below zero, i.e., deflation. Thus, the Fed’s policy goal to target a 2 percent inflation rate is fatuous. In a free market economy as the output of goods and services increases prices in general should decline.
As Murray Rothbard pointed out, “rather than a problem to be dreaded and combatted, falling prices through increased production is a wonderful long-run tendency of untrammelled (sic) capitalism. The trend of the Industrial Revolution in the West was falling prices, which spread an increased standard of living to every person; falling costs, which maintained general profitability of business; and stable monetary wage rates—which reflected steadily increasing real wages in terms of purchasing power. This is a process to be hailed and welcomed rather than to be stamped out.”
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