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Inflation targeting is economic superstition.

I distribute. You re-distribute. He gives your hard-earned money to lazy scroungers. -- JakeS
by Migeru (migeru at eurotrib dot com) on Sun Mar 17th, 2013 at 12:58:17 PM EST
[ Parent ]
It's worked well enough for us, but let's stay on topic.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Sun Mar 17th, 2013 at 01:00:13 PM EST
[ Parent ]
The central bank should not telegraph its intentions.  Ideally you'd like to have a steady inflation rate and a solid economy.  In good times that's fine.

In the times in which we live, the central bank ought to maintain flexibility to do what it needs to do to help put the economy back on track and people back to work.  If that means higher inflation for a while, so be it.  Hence the shouts from the Krugmans of the world at Bernanke in recent years.

Be nice to America. Or we'll bring democracy to your country.

by Drew J Jones (pedobear@pennstatefootball.com) on Sun Mar 17th, 2013 at 01:06:18 PM EST
[ Parent ]
Raising inflation above the target to lower the real interest rate is only needed if the government fails to launch aggressive fiscal policy at the zero lower bound.

That's when you get QE and "responsibly irresponsible" monetary policy. Keep the inflation target, but add a target (business cycle unemployment, or something) which means the central bank can deviate from the inflation goal if there are other pressing issues, like unemployment caused by excessive austerity.

As a matter of fact, the dual mandate of the Riksbank (inflation targeting and financial stability) is currently keeping the divided Riksbank board from cutting rates (currently at 1.25%). The reason being is that there are worries about a housing bubble and private sector overindebtedness. The Riksbank has even come straight out and told the government they will cut rates if certain laws are changed, like demanding bigger down-payments, stricter repayment schedules and an elimination of interest rate deductions for borrowers.

This in turn is making the export companies angry as the relatively high rates are strengthening the krona, making exports less competitive. It would be fun if the Riksbank instead of cutting rates instituted a Swiss-style limit on the appreciation of the krona.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sun Mar 17th, 2013 at 01:27:33 PM EST
[ Parent ]

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