The Sarcasm Report v.135

October 17, 2011
Calculated Risk: Fed's Evans suggests raising inflation target until unemployment falls below 7%

I think we should consider committing to keep short-term rates at zero until either the unemployment rate goes below 7 percent or the outlook for inflation over the medium term goes above 3 percent. Such policies should enable us to make progress toward our mandated goals.

1. Why not just split the difference? If 2% is too low and 3% seems better, then why not try 2.5% first and see how that goes? Oh wait. Inflation has actually averaged 2.5% over the past decade. Never mind.

2. On average, oil prices have risen 12.7% per year over the last decade. I can't wait to see what raising the inflation target will do. If there is one thing that will bring job creation back to America it is higher oil prices. I can't tell you how many times I think to myself, "Why can't oil prices be higher? It is the only thing holding me back from visiting many of this country's many fine service-based restaurants."

3. We definitely need more inflation to solve our unemployment problem. Just look at what the Phillips Curve shows.

4. If 3% inflation is better than 2%, then surely 4% is better than 3%, and so on, and so on. In fact, if the Fed is willing to compromise on its long-term inflation fighting credibility, then let's swing for the fences and put 39.1 million people to work!

5. Let's adopt Gregory Mankiw's solution too while we are at it. The markets love chaos! If a full-blown currency crisis can't create jobs, then what can?