Inflation and the Law of Unintended Consequences

By jer979!! | | 12 Aug 2020

tl;dr: Inflation has been officially low for a while now. What happens if we take our eye off the ball?

For years now, the Fed has officially “missed” its inflation target of 2% annually.

Personally, I just watch our Costco receipts and some of the other basics (not technology related) and I can see inflation.

If you aren’t privy to our shopping list, you need look no further than recent all-time highs in gold and silver as evidence of inflation. After all, those are perceived as fixed supply assets. The price has gone up, which means they have inflated.

But, fine, there are a basket of goods/services and the economy is far wider than our grocery bill or people trading precious metals.

Still, given what we are seeing recently with something that can only be described as a cavalier attitude towards the value of money, I wonder what the Fed’s possible relaxation of inflation targets might mean?

See: Fed Weighs Abandoning Pre-Emptive Rate Moves to Curb Inflation: Central bankers look to change long-running strategy to encourage lower rates, shift unemployment-inflation dynamic

We’ll leave the debate aside for another day about whether it’s a good policy for a bank to be focused on job creation as its emphasis.

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