{"id":8422,"date":"2015-05-24T06:58:08","date_gmt":"2015-05-24T11:58:08","guid":{"rendered":"http:\/\/olduvai.ca\/?p=8422"},"modified":"2015-05-24T06:58:08","modified_gmt":"2015-05-24T11:58:08","slug":"todays-cpi-lesson-the-feds-2-inflation-target-is-completely-stupid","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=8422","title":{"rendered":"Today\u2019s CPI Lesson: The Fed\u2019s 2% Inflation Target Is Completely Stupid"},"content":{"rendered":"<h3 class=\"entry-title\"><a href=\"http:\/\/davidstockmanscontracorner.com\/todays-cpi-lesson-the-feds-2-inflation-target-is-completely-stupid\/\" target=\"_blank\">Today\u2019s CPI Lesson: The Fed\u2019s 2% Inflation Target Is Completely Stupid<\/a><\/h3>\n<p>The madness of the Fed\u2019s pending 81 month run of zero interest rates comes down to an inflation\u00a0subterfuge that has no logical or empirical grounding\u00a0in\u00a0real world economics.\u00a0Essentially, the Keynesians who currently inhabit the Eccles Building have turned\u00a0all of central banking\u2019s anti-inflation\u00a0history on its head,\u00a0saying, instead,\u00a0that\u00a0there is not enough\u00a0of it\u00a0to create optimum economic\u00a0growth and wealth; and, besides,\u00a0the CPI\u00a0is running\u00a0below the 2% target\u2014so prolonging the free money gravy train\u00a0can\u2019t do much\u00a0harm.<\/p>\n<p>Every part of that proposition is dead wrong.\u00a0To wit, free\u00a0money does\u00a0immense harm by fueling rampant carry trade speculation; there is zero evidence that 2% inflation results in any more growth than 1% or\u00a0even 0% inflation; and, as an empirical matter, there\u00a0is plenty of inflation in the US economy and has been during the entire\u00a0past 15 years of rampant money printing designed to stimulate more growth.<\/p>\n<p><em><strong>Still,\u00a0real final sales in the US economy\u00a0have\u00a0grown at only\u00a0a 1.8% rate since the\u00a0year 2000, or by just half of the 3.5% rate recorded for the prior\u00a046 years.\u00a0But that downshift is not in any way attributable to inflation missing the allegedly optimum 2% target. In fact, during the last 15 years the CPI has increased at an average rate of exactly 2.18%.<\/strong><\/em><\/p>\n<p>So where\u2019s the beef or rather the allegedly missing beef? Well, the monetary high priests\u00a0hold that the PCE deflator, not the CPI, is the correct measure of inflation because it takes better\u00a0account of changing consumer preferences or weighting shifts in the market basket of what people buy. That is,\u00a0it captures their shifting to chicken, tuna\u00a0or spam when they can\u2019t afford steak.<\/p>\n<p>&nbsp;<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Today\u2019s CPI Lesson: The Fed\u2019s 2% Inflation Target Is Completely Stupid The madness of the Fed\u2019s pending 81 month run of zero interest rates comes down to an inflation\u00a0subterfuge that has no logical or empirical grounding\u00a0in\u00a0real world economics.\u00a0Essentially, the Keynesians who currently inhabit the Eccles Building have turned\u00a0all of central banking\u2019s anti-inflation\u00a0history on its head,\u00a0saying, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[1055,172,2120,202,303,305,426,4800,1154,467],"class_list":["post-8422","post","type-post","status-publish","format-standard","hentry","category-economics","tag-consumer-price-index","tag-cpi","tag-david-stockman","tag-deflation","tag-fed","tag-federal-reserve","tag-inflation","tag-inflation-target","tag-interest-rate-policy","tag-keynesian-economics"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/8422","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=8422"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/8422\/revisions"}],"predecessor-version":[{"id":8423,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/8422\/revisions\/8423"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8422"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8422"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8422"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}