Fed Chair Jerome Powell apparently doesn’t see the pernicious effects of inflation
At one time, the Federal Reserve’s sole mandate was to maintain stable prices and to “fight inflation.” To the Fed, the financial press, and most everyone else “inflation” means rising prices instead of its original and true definition as an increase in the money supply. Rising prices are a consequence – a very painful consequence – of money printing.
Naturally, the Fed and all other central bankers prefer the definition of inflation as a rise in prices which insidiously hides the fact that they, being the issuers of currency, are the real culprit for increased prices.
Be that as it may, the common understanding of inflation as rising prices has always been seen as pernicious and destructive to an economy and living standards. In the perverted world of modern economics, however, the idea of inflation as an intrinsic evil has been turned on its head and monetary authorities the world over now have “inflation targets” which they hope to attain.
America’s central bank is right in line with this lunacy, as it has been reported that at the Fed’s “May minutes” it wants “a temporary period of inflation modestly above 2 percent [which] would be consistent with the Committee’s symmetric inflation objective.” Translated into understandable verbiage, the Fed wants everyone to pay at least 2% higher prices for the goods they buy.
Yes, by some crazed thinking US monetary officials believe that consumers paying higher prices is somehow good for economic activity and standards of living! Of course, anyone with a modicum of sense can see that this is absurd and that those who espouse such policy should be laughed at and summarily locked up in an asylum! Yet, this is now standard policy, not just with the Fed, but with the ECU and other central banks.
The baneful consequence of this economic quackery is being felt by American workers as admitted by the Labor Department. Instead of spurring expansion, inflation is eating into and depressing wages:
For workers in ‘production and nonsupervisory” positions, the value of the average paycheck has actually declined in the past year. For those workers, average ‘real wages’ – a measure of pay that takes inflation into account fell – from $22.62 in May 2017 to $22.59 in May of 2018.*
While the decline in nominal wages is not significant, the manner in which the government now calculates inflation has been skewed to understate its impact. Under the previous calculation, the current US inflation rate is probably closer to 5%.
Read the rest of the article on ZeroHedge: The Fed’s “Inflation Target” Is Impoverishing American Workers | ZeroHedge