George Will Neither Understands Inflation Nor the Mission of the FED
While Brad DeLong rightfully wants to nominate Lawrence Kudlow for Stupidest Man Alive, might I suggest that George Will should be given serious consideration:
The Fed has no mandate to be the dealmaker for Wall Street socialism. The Fed’s mission is to preserve the currency as a store of value by preventing inflation. Its duty is not to avoid a recession at all costs; the way to get a big recession is to engage in frenzied improvisations because a small recession, a.k.a. a correction, is deemed intolerable. The Fed should not try to produce this or that rate of economic growth or unemployment … A surge of inflation might mean the end of the world as we have known it.
Mark Thoma objects to Will’s description of the FED’s mission:
George Will tries to talk about Fed policy, but if you don’t understand the Fed’s goals – and he doesn’t – then the analysis of policy will be based on a faulty premise and reach incorrect conclusions.
Mark argues that it is the job of the FED to keep us close to full employment. But if Will were correct that a rise in the inflation rate would lead to the end of the world, then one might understand his view on the role of the FED. But I doubt any serious person thinks an increase in the inflation rate is THAT costly. Even Lawrence Kudlow is not THAT stupid – is he?