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Showing posts with label Macroeconomic Policy. Show all posts
Showing posts with label Macroeconomic Policy. Show all posts

Monday, October 28, 2013

A Change of Heart On Inflation

My latest installment on Stiglitz was heavily centered on the issue of inflation and how the Fed seems completely obsessed with keeping it low. Yet, a recent piece in the New York Times indicates that there might be a sea change with the appointment of Janet Yellin.

The Fed has worked for decades to suppress inflation, but economists, including Janet Yellen, President Obama’s nominee to lead the Fed starting next year, have long argued that a little inflation is particularly valuable when the economy is weak. Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.

I agree. We have to end the inflation hawk hysteria and move towards a more balanced approach towards growth. This is exactly what Stiglitz was hoping would happen when he wrote his tome two years ago and we may finally be heading in that direction.