Paul Krugman: To be fair, those making the case for monetary tightening are more thoughtful — but the advice they’re giving could be just as destructive. This [is] coming from the assertion that wages, after stagnating for years, have started to rise rapidly. But that bump is probably a snow-related statistical illusion, as average wages normally jump in bad weather. [Of] our multiple measures of wages, only one of them is showing a notable uptick. In the past wage increases of around 4 percent a year have been consistent with low inflation. And raising the Fed’s inflation target would mean seeking faster wage growth, because too low an inflation rate puts the economy at risk of Japanification, [i.e.], getting caught in a trap of economic stagnation and intractable debt.
Posted on: Fri, 14 Mar 2014 08:25:27 +0000