The Fed's inflation fixation

Source: Independent Institute
by Randall Holcombe

"Despite arguments about the perils of deflation, the United States had a long-term decline in prices from 1865 until the Federal Reserve was established in 1913, at a time in which the industrializing economy was growing more rapidly than it ever had before. As to the argument that people will wait to purchase goods when they anticipate falling prices, computer prices have been falling for half a century, along with the prices of other high-tech goods, and those markets have seen rapid growth. Deflation is not bad for the economy, and deflation that represents increases in productivity produces prices that give a more accurate representation of real cost of goods and services. There is no good reason for the Fed to deliberately try to create inflation." (04/19/17)