Price Stability and Nominal GDP Targeting
“While we should not stubbornly insist on first-best policy if the second-best is all we can get, neither should we ignore the question of which policy is first-best. As long as we are reconsidering the Fed’s mandate, nominal GDP targeting should be on the table.” ~ Alexander William Salter
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About That “0 Percent” Inflation in July
“Americans consume goods and services, not the CPI. A look within the June to July 2022 price index exposes 0% inflation as a meaningless statistical aberration. Celebrating it as an achievement is pitiful.” ~ Peter C. Earle
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Accounting for Inflation
“The great irony is that inflation would have been transitory if only the Fed had stabilized nominal spending. Prices would have risen above trend to reflect below-trend production and then returned to trend as production recovered.” ~ William J. Luther & Morgan Timmann
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Save Your Flip Flops for the Beach
“Voters should vote their convictions and consciences as the Framers intended, and policymakers and pundits should stop flip-flopping like fish or flimsy footwear. Either way, it’s a bad look that hurts democratic discourse.” ~ Robert E. Wright
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Making Sense of the Recession
“Unemployment, for good reason, lags the onset of recessions. And assuming that a widespread burst in employment categorically signifies optimism or portends a quick resumption of economic growth is simply unwarranted.” ~ Peter C. Earle
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Prices Rose Even Faster In June
“Inflation has been too high for too long. Bringing inflation back down should be the Federal Reserve’s top priority.” ~ William J. Luther
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Price Stability and the Fed
“Politics is compromise. Half a loaf is better than no loaf at all. Price stability is the half-loaf of monetary policy rules. It seems foolish to go hungry simply because haute cuisine is unaffordable.” ~ Alexander William Salter
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Proposing a Hank Williams Jr. Economic Misery Index
“Another problem is that the misery indices, like definitions of recession and stagflation, focus on unemployment to the exclusion of real wages. But real wage declines are painful, and not fully captured by inflation alone.” ~ Robert E. Wright
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The Corrective Contraction
“This mild recession will soon pass. Lower growth due to a higher trend inflation rate can persist forever—and will if the Fed fails to do its job.” ~ William J. Luther
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Biden Borrows the Nixon Playbook on Recessions
“The White House’s definitional wordsmithing could not overcome the onset of worsening economic realities in 1974, and its frequent appeals to the NBER determination could not run down the clock against a prolonged recession.” ~ Phillip W. Magness
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Inflation and the Fed’s Failure to Act
“Fed officials must prioritize monetary stability over political objectives such as inequality and climate policy. To simplify its operations, the Fed should consider returning to the pre-2008 corridor system of monetary policy.” ~ Thomas L. Hogan
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The Recession is Here. Will Stagflation Follow?
“An ugly picture is coming into focus: rising inflation, slowing growth, and a job market that looks poised to deteriorate. Bearing in mind the lag associated with employment, it is no longer unthinkable that stagflation may be ahead.” ~ Peter C. Earle
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