The US Fed Got It Wrong —  Thanks!

By Shlomo Maital

    Paul Krugman, in his NYT op-ed, notes that the FED got it wrong – thank goodness. 

    The Federal Reserve Board, led by Chair Jerome Powell, radically boosted interest rates, creating a windfall of profits for the banks, who used our money to profit while refraining from paying us higher interest rates on our deposits. 

     The FED clearly sought to extinguish inflation, to reach its 2% target (unreasonable, unlikely),  at the cost of creating a recession.  A hard landing.  This was the plan.

      It failed.  Inflation has declined, in the US and mostly elsewhere.  Soft landing!  No recession. The FED was wrong.  Thank heavens.

       Inflation hawks now control the US Federal Reserve.  In the tradeoff between inflation and unemployment (Krugman notes the FED thought unemployment would soar and was OK with this),  the FED today opts for slashing inflation, virtually at any cost.  This is wrong-headed.  Inflation is the change in the price of goods and services.  At high levels, it has bad consequences. But at moderate levels, like today’s, it really doesn’t.  Unemployment, in contrast, is pure suffering – for those out of  a job, who watch their unemployment benefits disappear.

      Well done, Fed. You got it wrong. No recession. Keep up the good work…