Tuesday, July 31, 2012

That Insurance Would Have Been Nice A Few Years Ago

Crazy that we are still here.

Central bankers generally set policy based on their judgment about the most likely path for the nation’s economy. But Mr. Greenspan argued that the Fed sometimes should do more than its forecast suggested, buttressing the economy against large, potential risks. He described such moves as “taking out insurance.”

Maintaining full employment at a steady reasonable inflation rate isn't easy. But the difficult bit of that is the "maintaining full employmet." Killing inflation, if it pops up, is easy. The implicit 2% inflation ceiling is insane or evil, depending on your view of the people in charge.