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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In "It's Not a Crisis. This Is the New Normal," we explain, as matter-of-factly as we can, what exactly our finances look like, how brutal it is to sustain quality journalism right now, what makes Mother Jones different than most of the news out there, and why support from readers is the only thing that keeps us going. Despite the challenges, we're optimistic we can increase the share of online readers who decide to donate—starting with hitting an ambitious $300,000 goal in just three weeks to make sure we can finish our fiscal year break-even in the coming months.

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