Last week, on 21 September, the Federal Open Market Committee (FOMC) of the Federal Reserve System issued a press release. The second paragraph reads,
Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time before rising to levels the Committee considers consistent with its mandate.
Just a couple of hours later, I attended a seminar hosted by the Nashville Branch of the Federal Reserve Bank of Atlanta. The speaker was Michael F. Bryan, vice president and senior economist in the research department of the FRB Atlanta. He explained the FOMC statement, but I never got past the double-speak.
The Fed believes that it has a "mandate" to encourage inflation and thereby promoting "maximum employment and price stability." The question raised in my mind is, How does inflation equal price stability?
Reference was made to a speech given before the National Economists Club on 11 November 2002 by Ben Bernanke entitled, "Deflation: Making Sure "It" Doesn't Happen Here." (full text here)
Apparently the only thing the FED fears worse than prices that don't go up, is prices that go down. The solution to all our problems according to Bernanke is...print more money.
It would be wonderful if we all had a printing press to solve our every desire both great and small, but we are bound to live by the productivity of our own hands. The Empire operates on a different system-it creates the means to spend out of thin air.
More of the green paper available for the same amount of goods means that the price of the goods goes up - that is inflation! More paper means the paper is worth less.
How does inflation equal price stability? Sorry, but I just can't find the answer. Maybe I'm just not sound enough in my reasoning...or perhaps, it just ain't so!
From Solitude,
David O Jones
