no third solution

Blogging about liberty, anarchy, economics and politics

A Fed divided?

September 1st, 2006

Recent goings-on at the Federal Reserve suggest that the governors are split on the issue of inflation:

“But other Fed policymakers are less patient, believing it’s dangerous to let inflation linger so high for so long. For example, Michael H. Moskow, president of the Federal Reserve Bank of Chicago, has argued that inflation tends to get stuck at a certain rate and becomes harder to bring down because businesses and consumers get into the habit of expecting price and wage increases to continue.”

Of course, I’ve never been a fan of inflation – not really even the Friedmanesque brand of 3-5% per year. But yeah… consumers do get into the habit of expecting price and wage increases. If by “habit,” you really mean “respond to the inflation-driven market conditions,” because the effects of inflation take time to make their presence known throughout the economy. Eventually a little bit more inflation is required. Kinda like heroin.

no third solution

Blogging about liberty, anarchy, economics and politics