In the past few weeks I’ve done a few posts suggesting that monetary policy in the US is too tight.
A few years ago I did many posts suggesting that monetary policy is too tight.
I wouldn’t blame readers for assuming that I’m still making the same argument, but actually my current argument is quite different.
After late 2008, I thought money was too tight in an absolute sense, that is, according to any plausible Fed target. Unemployment was quite high and inflation expectations were very low.
Today is quite different. For instance, suppose the Fed announced tomorrow that they had adopted Bill Woolsey’s 3.0% NGDP target, level targeting. That’s certainly a very reasonable target. In that case I would not argue that money is currently too tight, I’d argue the Fed is right on course.
My current argument is that money is too tight in a relative sense, that is, relative to the Fed’s own announced 2% PCE inflation target. Now it’s true the Fed has a dual mandate, but nonetheless inflation should be expected to average 2% over the long term. And right now that’s not the case, PCE inflation is likely to undershoot 2% over the next few decades.
BTW, Here’s an article about the worsening nursing shortage. And here’s an article about the worsening teacher shortage. These are the middle class jobs that supposedly are no longer available, and yet employers can’t find people to do them at the current (sticky) wage rate. That suggests to me that we are getting close to the natural rate of unemployment. Maybe not quite there, but close.
PS. The first article also mentions that there is a shortage of schools to train nurses. Could this be a planned shortage, to keep salaries higher? (As with medical doctors)