I’m summarizing a couple points from a recent Ezra Klein podcast with Paul Krugman, a famous American economist. See the episode here.
1st thing. Apparently J Pow’s administration is using the one inflation metric that has shown the greatest amount of disinflation. That is, core inflation ex housing. In short, rising rents would not factor into the Fed’s current calculation of inflation. I find this interesting, because it dilutes and distorts our collective sense of what inflation is currently at, allowing for more inflation than has historically been allowed the last 30 years or so, simply because of the lens used.
Takeaway here, the Fed is using a more liberal, looser interpretation of what inflation means and perhaps a less stringent approach to reigning in inflation as a result.
2nd thing. The Fed has historically targeted a 2% inflation rate. Paul Krugman alluded that he, and some other economists in his circles, could envision a target inflation rate of say 3% or 4%. On the flip side, there’s other economists vehemently opposed to this idea, with the thinking that compromising on 2% could give way to 5% and could give way to 10%.
Takeaway here, among many economists, there’s a more liberal, looser sense of what inflation should be.
Taken together, I see some bad habits and poor discipline forming with monetary policy. We could have a world with a weaker dollar, running at a higher target inflation rate year over year.
This make me fall back to big daddy BTC. Humans and societies are subject to bad habits. Humans and societies compromise their own values all the time.
BTC is capped and forces discipline on the beholder.