A while back the notion of the Fed using a higher inflation target had received a good deal of debate. Some of the main points that I recall from the debate were that raising the target would have helped the immediate situation at hand – tight money – like one of those, “It’s better than doing nothing,” sorts of plans.
At the time, I had trouble understanding the debate in practical terms rather than technical or theoretical terms, because there have been many good ideas discussed at the Fed, like NGDP targeting. But at the end of day, these discussions are fruitless and only the bad or ill-timed ideas seem to gain any traction – like IOR in the thick of a recession and trying to prop up nominal short rates with repos as the natural rate sinks like a stone. All of this lends to the impression that the central bankers at the Fed only know how to cause a lot of damage and that they may not particularly care about it because there is always a voiceless scapegoat at the ready. Think Uncle Milty in his discussion about who has press agent propagandists and who does not.
I am aware that it must seem like I hold some pretty cynical views about these supposedly well-intentioned technocrats who are really just victims of all the things they know that just aren’t so. But I often wonder why doing nothing is settled as the course of action when these many ideas that are discussed are classified as “better than doing nothing.” One could have a homerun of an argument about why this good idea or that one ought to go somewhere other the circular file… and it just doesn’t matter. Nothing happens – or worse – the wrong thing is implemented that never received the benefit of public debate.
The implicit results of recent semi-public theoretical monetary debates show that this is much worse than cat herding and they have Fed speak for “Buzz off” written all over them. I have seen very few arguments in support of any one item in the whole plethora of bubble gum and bailing wire contraptions they call a toolbox. And with our faces that we have talked blue, especially on the point of predictability beyond predictably unpredictable, we get to watch helplessly and in horror as they stubbornly cling to an irrational headline inflation target and attempt to compensate for its shortcomings by activating a tool that is perhaps good for some day, but certainly not to-day.
Obviously, talented people who have been trying to talk the Fed’s central bankers into doing the right things all these years since the 2008 crisis are barking up the wrong tree. I can’t say which tree needs to be barked at. But is probably the one in the Capitol Building where the people are who can make the Fed critters listen.
I still keep writing letters to representatives, senators, the Treasury. I will still write more. But I am nothing more than just me doing what I can.