>Consequently
>inflation became a cover for stagnation.
This is related to the argument Michael Perelman makes in his book on Keynes: the softening of competition allowed by the (bastard) Keynesian state gave rise to a sloppiness among capitalists.
Ellen Frank wrote:
>But the question remains. What if BLS announced a 0.5% CPI increase for
>July? What's the liberal-progressive line? In arguing against NAIRU,
>a number of people have essentially said - the Fed shouldn't tighten
>because rising wages doesn't lead to inflation. But what if it did? Does
>that
>mean the Fed SHOULD tighten?
No, the Fed shouldn't tighten, but the point that should be made is that the Fed is leaning towards tightening not out of fear of "inflation," which is mostly chimerical at this point literally defined, but of a deep class fear of tight labor markets. That, and a fear of a bubble, about which the IMF sounded pretty clear.
But should the Fed ever tighten? What if inflation were 6%? 9%? Should we ignore it? Should the Fed funds target be 5% forever? 4%? Shouldn't the Fed be worried about the bubble? I think people would like the Fed to assuage some of the pains of capitalism, but it can't behave like that without a lot of the rest of society changing. I like writing about how the Fed helps form & maintain a ruling class, but I'm not sure I want to give them policy advice.
Doug