Today, Bernanke and The Fed officially - and for the first time - announced inflation targets. Aside from being at odds with the Fed’s mandate for “stable prices,” this is just another target for them to completely miss is spectacular fashion.
Prior to this, the Fed only went so far as “predicting” the inflation rate. Now they are going to put in the extra hours to achieve it. Of course, they won’t get it right - they never do.
Which is why it’s so funny for Krugman to whine that the inflation target of two percent isn’t HIGH enough (apparently this progressive liberal wants us to pay more for things FASTER).
But why is the inflation target only 2 percent? …the truth is that recent experience has made an overwhelming case for the proposition that the 2 percent or so implicit target prior to the Great Recession was too low, that 4 or 5 percent would be much better.
Relax, Krugman! Their TARGET is 2 percent. They’ll get it wrong! Don’t worry!
The Fed’s projections are consistently off more than the difference Krugman wants to add. In 2010, their inflation expectations for 2011 were 1.1 to 1.6 percent. With the benefit of hindsight, we can check those predictions!
The Bureau of Labor Statistics tells us that headline inflation for 12 months trailing Dec 2011 was THREE percent (100% larger than the Fed’s best guess.)
Used cars were up 4.0 percent!
Clothing was up 4.6 percent!!
Groceries went up 6.0 percent!!!
Energy was up 6.6 percent!!!!
Gasoline was up 9.9 percent!!!!!
(source: 2011YIR CPI Summary)
So, fear not, Krugman - you’ll still see your 4-5% and we’ll keep seeing prices for basic necessities go up at rates much higher than that! Thanks for advocating this policy, Mr. Krugman! You liberal vanguard!
…Now, let me see if I can find your article on how stupid Herman Cain was for wanting a sales tax because it would put an unfair burden on low/middle income Americans. Oh yeah, here it is. At first glance, it seems like you’re only sympathetic to the plight of the workingman when a Republican is the one proposing the policy. But we all know you have way more integrity and credibility than that!