The Cato Conference takes off (and crashes)

As one of the speakers, Plosser quickly leaves his mark (of Cain?):

Federal Reserve Bank of Philadelphia President Charles Plosser said Thursday he would like to see the central bank target a lower rate of inflation, adding he wouldn’t be too concerned if the economy entered a period of deflation.

“It’s not obvious a period of mild deflation is such a bad thing,” Mr. Plosser said in response to a question after speaking at the Cato Institute.

Mr. Plosser said he saw no reason the Fed couldn’t target a zero inflation rate, which other Fed officials have argued against because of a greater risk of deflation. Many economists believe that falling prices bring economic stagnation.

Mr. Plosser, however, said many economic models have shown that a period of mild deflation, “at least in theory,” could be positive.

Yeah, like my friend Patricia says, maybe like Draghi he thinks people will be able to buy more stuff!

I bet Scott ‘trembled’!

4 thoughts on “The Cato Conference takes off (and crashes)

  1. Depends in the source of the deflation on whether bad or good. The good delation doesn’t come from monetary policy, and so the central bank doesn’t really have a reason to target it.

  2. Well, I wonder if there can be a good deflation that is sustained…what then happens to borrowers? Who would lend on property…and who would buy? Would it not make more sense always to wait a while before buying property, or any large outlay…thus leading to more deflation?

    And keeping your money in cash not a bad idea, when there is deflation…so money is taken out of circulation, ala David Hume’s gold coin buried in the backyard…

    The Japan experience shows, I think, that deflation, monetary or otherwise, is a very tricky character

    Plosser is an outright menace to American prosperity….

    Think about it: USA inflation has been sub-2 percent since 2008, one of the lowest inflation rates in the postwar era…and Plosser is still talking about inflation as the problem! And rhapsodizing about deflation!

    Plosser also proposed (see Grumpy Economist) that the Fed have a single mandate—-you guessed it, the old “inflation is our only business” bromide.

    A signal danger to Western economies is a central bank that only fights inflation…that is sure to end in secular stagnation ala Japan…

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