The Inflation Targeting Scam and Why it Guarantees the Mother of Financial Meltdowns

by David Stockman
David Stockman’s Contra Corner

The estimable Martin Feldstein put the wood to the Fed in a recent op ed and in so doing hit the nail directly on the head. He essentially called foul ball on the whole inflation targeting regime and the magic 2.00% goalpost in part due to the measuring stick challenge.

A fundamental problem with an explicit inflation target is the difficulty of knowing if it has been hit.

That problem is plainly evident in the chart below. You could very easily make the argument that goods prices are beyond the Fed’s reach because they are set in the world markets and by the marginal cost of labor in China and the EM.

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