Central Bank Group Think: Convince the Public More Inflation is Coming

Chicago Fed chief Charles Evans is worried about the lack of inflation primarily because he is clueless about where to find it. As further proof of his economic illiteracy, Evans says "Low inflation expectations keep inflation down".

The Federal Reserve should take a more aggressive stance toward boosting inflation and stop talking so much about using interest rates to ensure financial stability, Chicago Fed President Charles Evans said.

Evans expressed concerns Wednesday that the public was losing faith in policy makers’ commitment to bring inflation back up to their 2 percent target.

The central banker has consistently argued for a slower pace of interest-rate increases than many of his colleagues on the policy-setting Federal Open Market Committee.

“In order to dispel any impression that 2 percent is a ceiling, our communications should be much clearer about our willingness to deliver on a symmetric inflation outcome, acknowledging a greater chance of inflation at 2.5 percent in the future than what has been communicated in the past,” he said in remarks prepared for a speech in London.

Two Asinine Economic Theories

  1. There is a need for inflation
  2. The Fed can achieve it by talking about it

For proof of number 2, look at Japan.

In regards to point number 1, the BIS agrees that routine price deflation may be beneficial.

BIS Deflation Study

The BIS did a historical study and found routine price deflation was not any problem at all.

“*Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive*,” stated the study.

For a discussion of the BIS study, please see Historical Perspective on CPI Deflations: How Damaging are They?

CPI deflation is not to be feared. More precisely, CPI deflation is a benefit. Falling prices increase purchasing power by definition and thus raise standards of living.

It’s asset bubble deflation that is damaging. When asset bubbles burst, debt deflation results.

Central banks’ seriously misguided attempts to defeat routine consumer price deflation is what fuels the destructive asset bubbles that eventually collapse.

Average 6th Grader vs Average Central Banker

The average consumer or any age wants money to buy more, not less. Even 6th graders understand the idea.

The average brainwashed economist thinks there is an economic benefit to having money buy less, not more.

The only way to get to be a board member of a central bank is to be a group-think brainwashed economic illiterate.

Hello Charles. Looking for inflation? Look at asset prices and the bubble you helped blow.

Mike "Mish" Shedlock

Comments (32)
No. 1-25
killben
killben

Among the bunch of idiots on display at the Fed, this guy takes the care. Are there any consequences to landing a punch on his face when he sprouts such inane ideas?

killben
killben

Among the bunch of idiots on display at the Fed, this guy takes the cake. Are there any consequences to landing a punch on his face when he sprouts such inane ideas?

truthseeker
truthseeker

Well if he really really really wants inflation, he would have to convince the Fed to take the Fed Funds rate back down all the way to zero, cut the prime rate to zero and then bring on QE-4 shoving a Trillion dollars worth of liquidity into the credit markets and watch what happens. That should steepen the yield curve and take the dollar down a good bit, yet the more I think about it, doing something so crazy and irresponsible, something weird happens, and the outcome you expect blows up in your face!

MudB
MudB

inflation is necessary in the debt based economy with overleveraged debt. You have to steal from everyone...to let debtors off the hook easier...to avoid it all crashing.

sachvik
sachvik

Mish - Long time reader here - posting for the first time. Agree that asset price inflation is off the hook, but there is no escape this time - previously investors could rebalance portfolios from US to Europe or Asia; this bubble is everywhere, except maybe Africa. The next recession is