October 31, 2017

When poor economic reasoning prevails

Suddenly, we seem to have forgotten the most basic of lessons: that inflation is a monetary phenomenon. However, given that inflation remains low, in spite of low unemployment, the absence of inflation is dubbed a mystery. In the opposite direction, a few years ago when unemployment was high, the absence of disinflation/deflation was also dubbed a mystery. The chart shows that inflation, measured by the PCE-Core has remained stable and low for a very wide range of unemployment rates. This should give pause to proponents of the Phillips Curve. Unfortunately, it doesn´t and the reason for that may be, as…...

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