Crucifying Mankind Upon a Cross of 2 Percent Inflation Targeting

A blog about business and economics.
June 10 2012 10:08 AM

Crucifying Mankind Upon a Cross of 2 Percent Inflation Targeting

Excellent column from Christina Romer: "More fundamentally, the Fed’s dual mandate doesn’t say it should care about unemployment only so long as inflation is at or below the target. It’s supposed to care about both equally. If inflation is at the target and unemployment is way above, it’s sensible to risk a little inflation to bring down unemployment."

I think the right way to think about this is that inflation and employment aren't two separate levers that the Federal Reserve addresses separately. Rather, the Fed impacts both inflation and employment by influencing aggregate demand. A years-long span of 8+% unemployment helps keep prices low. People who are broke or unemployed curtail their own consumption and thus alleviate scarcity. A tradeoff needs to be made in the short-term. If gas prices spike, people will be upset and many families' bottom lines will suffer. But is keeping the labor market weak in order to keep millions of people unemployed rather than commuting really a sound way of coping with the moderate scarcity of oil? I say no. Ben Bernanke seems to say yes. But he's getting away with not putting the issue squarely before the public.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Foreigners

More Than Scottish Pride

Scotland’s referendum isn’t about nationalism. It’s about a system that failed, and a new generation looking to take a chance on itself. 

iOS 8 Comes Out Today. Do Not Put It on Your iPhone 4S.

Why Greenland’s “Dark Snow” Should Worry You

Three Talented Actresses in Three Terrible New Shows

The Human Need to Find Connections in Everything

It’s the source of creativity and delusions. It can harm us more than it helps us.

Jurisprudence

Happy Constitution Day!

Too bad it’s almost certainly unconstitutional.

The Ungodly Horror of Having a Bug Crawl Into Your Ear and Scratch Away at Your Eardrum

My Father Was James Brown. I Watched Him Beat My Mother. Then I Married Someone Like Him.

  News & Politics
Weigel
Sept. 17 2014 12:02 PM Here It Is: The Flimsiest Campaign Attack Ad of 2014, Which Won’t Stop Running
  Business
Business Insider
Sept. 17 2014 1:36 PM Nate Silver Versus Princeton Professor: Who Has the Right Models?
  Life
Outward
Sept. 17 2014 1:59 PM Ask a Homo: Secret Ally Codes 
  Double X
The XX Factor
Sept. 17 2014 1:26 PM Hey CBS, Rihanna Is Exactly Who I Want to See on My TV Before NFL Games
  Slate Plus
Slate Fare
Sept. 17 2014 9:37 AM Is Slate Too Liberal?  A members-only open thread.
  Arts
Brow Beat
Sept. 17 2014 1:01 PM A Rare, Very Unusual Interview With Michael Jackson, Animated
  Technology
Future Tense
Sept. 17 2014 12:35 PM IOS 8 Comes Out Today. Do Not Put It on Your iPhone 4S.
  Health & Science
Bad Astronomy
Sept. 17 2014 11:18 AM A Bridge Across the Sky
  Sports
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.