Feb

26

Today's Wall Street Journal front-pager on how the Fed now purports to think about tradeoffs between inflation and unemployment is a must read for folks who play in debt, seeking to divine how the children on Constitution Avenue want us to think.

Executive summary: The Phillips Curve is dead. Employment is no longer the Fed's jumping off point for rate-setting decision-making. It's been replaced by (bear with me) the Fed's perception of the public's perception of the Fed's credibility in ensuring core inflation reverts to about a 2% zone.

I am still mulling the implications of this, but suffice to say this mushy standard marks a new "high" in the migration of monetary theory, from the now archaic phrase "gold standard."


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