Paul Kasriel on reasons for the Fed’s anti-deflation hysteria: “I have been wondering why the Fed has recently became obsessed with “an unwelcome substantial fall in inflation.” After all, if the economy is “cleared for takeoff,” why would the Fed care if inflation falls, or even if deflation occurs? What’s wrong with 4% real GDP growth and zero inflation? I have come up with two explanations for the Fed’s new obsession. One of the explanations is that the Fed wants is to create a diversion. The other explanation has to do with fear of an aborted takeoff.”
Why is the Fed Afraid of Lower Inflation
