Inflation Nation

Allan Meltzer has a good article in today’s New York Times on the threat of inflation created by the Fed’s policies. The Fed has tossed tons of money into the economy and there will be a reckoning. Policy is, of course, a matter of choices and the Fed has decided to put inflation concerns on the back-burner while trying to help the economy right now.
Once the economy finally gets back on its feet, tough decisions will need to be made. What needs to be done isn’t hard to figure out—massively drain liquidity. Instead, it will be a question of political will. Meltzer is concerned that the Fed has “sacrificed its independence and become the monetary arm of the Treasury.” That’s a good point.
I currently lean toward downplaying the impact of inflation. Why? Well, because everyone else sees it as inevitable. No one seemed terribly worried that Mine That Bird would come flying up the inside rail…so it happened.
With Tall Paul in his corner, I think Obama realizes the importance of the Fed’s role in combating inflation. I guess there really is no such thing as an independent Fed.

Posted by on May 4th, 2009 at 10:37 pm


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