The Wall Street Journal author Jason Furman fires the opening salvo by mainstream media pleading for higher inflation targets.
Mr. Furman, a professor of the practice of economic policy at Harvard, was chairman of the White House Council of Economic Advisers, 2013-17.
No Benefit to Inflation
There is no economic benefit to inflation. However, it does create winners and losers, with the winners being those with first access to money, especially the banks, the politically well connected, and the already wealthy.
I have discussed this many times before but it’s worth repeating again. Routine consumer price deflation is a benefit. It’s credit deflation resulting from the bursting of asset bubbles that is very damaging.
That’s not just my opinion, it’s the opinion of the Bank of International Settlements (BIS).
The exception to the general rule was the Great Depression but, that was also an asset bubble deflation coupled with consumer price deflation.
In their attempts to fight routine consumer price deflation, central bankers create very destructive asset bubbles that eventually collapse, setting off what they should fear – asset bubble deflations.
Economists fail to see that asset inflation matters, not just CPI inflation. That’s another point Furman fails to understand. The Fed has blown several assets bubbles of increasing amplitude in a foolish attempt to create more inflation while totally ignoring massive inflation in housing and other financial matters.
Most economists have no idea how to even measure inflation and/or focus only on consumer inflation. The result has been problem after problem.
