The Inflation Rate Is Too Damn Low

The Federal Reserve is worried about inflation:

Fifteen years ago, Japan found itself stuck with a problem: sinking inflation, interest rates near zero and a limited ability to generate higher prices. Five years ago, Europe faced the same challenge.

The worry haunting Federal Reserve officials is that they will be caught in a similar trap within the next decade. This concern is animating their yearlong review taking center stage with a two-day research conference beginning Tuesday in Chicago….“We’re trying to think of ways of making that inflation 2% target highly credible, so that inflation averages around 2%, rather than only averaging 2% in good times and then averaging way less than that in bad times,” Fed Chairman Jerome Powell said in February.

The fact that the Fed is “trying to think” of ways to increase inflation confirms what I’ve long thought: they don’t know how to do it. Neither did Japan’s central bank. Or Europe’s.

In theory, central banks are supposed to have absolute control over inflation. And in theory, maybe they do: flood the country with enough money for long enough and eventually inflation will rise. But the amount it takes in the face of a fundamentally deflationary economy is apparently so enormous that in practice it’s not always possible.

Most likely this has something to do with the aging of the population. Japan got there first, Europe got there next, and we’re inching in that direction too. What’s the answer to that?

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LESS DREADING, MORE DOING

This is the rubber-meets-road moment: the early days in our first fundraising drive since we took a big swing and merged with CIR to bring fearless investigative reporting to the internet, radio, video, and everywhere else that people need an antidote to lies and propaganda.

Donations have started slow, and we hope that explaining, level-headedly, why your support really is everything for our reporting will make a difference. Learn more in “Less Dreading, More Doing,” or in this 2:28 video about our merger (that literally just won an award), and please pitch in if you can right now.

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