Getting the wrong people to do the right things

There is a Milton Friedman video clip I watched many years ago, I recall it being in the Free to Choose series but I might be mistaken, where he was asked about which political party would be best to further his agenda, and his response was to the effect that it doesn’t matter because these things can’t wait and politics is all about getting the wrong people to do the right thing.

In other words, he cared about the substance of the stuff that gets done, not who does it, and he was willing to work with and talk to anyone who would listen.

In that regard, Trump doesn’t matter. He is just one guy in a sea of other wrong people who have influence on policy. It’s the stuff that matters. Persuasion matters.

If you suffer from Trump Derangement Syndrome (TDS), repeat that as many times as necessary to achieve a calming effect so you can focus on persuasion for the substance of the stuff that does matter.


More inflation now??

Scott Sumner addressed the question of whether more inflation now is a good a thing, a bad thing or somewhere in between here. But, respectfully, I’d have to say that I can’t tell. My inkling is that inflation is really the wrong measure to use for policy purposes because it can rise and fall for multiple reasons, many of which have nothing to do with monetary extremes.

Given the recent market response to back-to-back announcements of off and then on again tariff wars, there appears to be at least some hint of a mix of supply shocks that are playing into the economic forecast.

Mester recently reiterated the point that the Fed is targeting headline PCE. So really, my opinion is that the last thing we would want is for the Fed to tighten in response to above target PCE headline inflation if the rise is the result of negative supply shocks because these do not cause a rise in aggregate spending. Tightening under this circumstance would push down NGDP, translating the negative supply shock into a broad demand shock.

My opinion is that there are less harmful ways of dealing with supply side inflation (like reversing the misguided policies that cause it) than with monetary policy. Using monetary policy to deal with it should always and everywhere be the absolute last resort rather than the go-to policy panacea of price control that merely breeds scapegoats as it trades one problem for a much larger and broader one.

I can honestly say that throughout the years, I have been quite a pundit of inflation targeting in general for this reason and I see no reason to change my opinion now. I do not care who is either in or running to be in the White House or which party is “in power.” It is well beyond immoral to use monetary policy as a political weapon, and it should be put well out of reach of anyone who would try.