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Wednesday, February 9, 2011

Allan Meltzer on inflation...time to sit up and pay attention.

Is inflation on the horizon? Maybe. But when Allan Meltzer says it is, better wipe off your glasses and look real hard. You can't wait for it to show up in the CPI and then do something about it then. And any belief in the exploitability of the Phillips curve is a Faustian bargain.

If you are worried about inflation you should be. And what should keep you awake nights is wondering whether the Fed has the political will to increase interest rates when the recovery is less than complete (whatever that means). Given how they have compromised their independence lately, tell those sheep you are counting hello for me.


ArmChairEconomist said...

Doc, certainly you don't doubt Bernanke's knowledge of the Phillips Curve and the Miller/Burns Fed era?

Also, given Bernanke's remarks today, it doesn't seem that Meltzer's last recommendation is gonna happen.

Randall Parker said...

Hey Armie: Of course I do not doubt that. But my wife always asks if i took my medicine before I go to bed. I always do, but I don't suppose being remind hurts.

I thought I heard the Chairman say they might end QEII early. Did I miss something?