Republicans are marching towards a high-stakes November election. Alas, they seem to have left some important conservative principles behind. The 2024 GOP Platform is notable for what it omits: its lack of commitment to fiscal responsibility is a major oversight. Admittedly, Republican rhetoric has long exceeded Republican policy when it comes ...

The Federal Reserve is trying to engineer a gradual disinflation. It is getting outright deflation. The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) decreased 0.1 percent in June. Consumer prices have grown 3.0 percent over the last year, which is the lowest 12-month rate since March 2021. Core CPI, which ...

The Federal Reserve has a 2-percent inflation target. Central bankers are supposed to conduct monetary policy such that the long-run trajectory of the price level follows a 2-percent growth path. Most policy-focused macroeconomists think this is a reasonable way to achieve price stability and predictability without running the risk of ...

Replacing income taxes with tariffs doesn’t pencil out. Donald Trump rocked Washington last week with his proposal to fund the federal government solely from tariffs. Until roughly a century ago, tariffs composed the vast majority of national revenue, but today income and business taxes make up the lion's share. Can Uncle Sam go back? ...

The American public must demand its leaders get serious about winning in space. The ongoing competition between the U.S. and China is the defining geopolitical event of our time. International finance and trade, the status of Taiwan, and energy security are some of the hot-button contests both sides want to win. Yet the struggle with the ...

Prices held steady in May, the Bureau of Labor Statistics reported on June 12. The Consumer Price Index grew at a continuously compounding annual rate of just 0.1 percent last month. It has grown 3.2 percent over the last year. Core CPI, which excludes volatile food and energy prices, grew at a continuously compounding annual rate of 2.0 ...

Greedy oil companies are colluding to keep output low and prices high – or so claim Senate Democrats and the Federal Trade Commission. Senate Majority Leader Chuck Schumer and FTC Chair Lina Khan suspect energy executives of unlawful profiteering. Gas prices currently average about $3.60 per gallon, up more than a dollar since President Biden ...

Although inflation remains high,disinflation continued in April. The Bureau of Labor Statistics reported the Consumer Price Index (CPI) increased 0.3 percent last month, for a year-over-year change of 3.4 percent. The Core CPI, which excludes volatile food and energy prices, also rose 0.3 percent on the month and 3.6 percent year-over-year. On ...

Can the Federal Reserve build a better mousetrap? Wall Street Journal columnist Joseph Sternberg hopes so. Sternberg rightly indicts the Fed for failing to predict and contain the worst inflation in 40 years. The problem is "the central bank's model of the economy – the set of spreadsheets, as it were, that are supposed to help Fed ...

Despite extraordinary monetary tightening by the Federal Reserve, inflation remains elevated above its 2 percent target. Even more worrying, inflation accelerated during the first quarter. The Consumer Price Index (CPI) rose at an annualized rate of 4.5 percent over the last three months. The figures for Personal Consumption Expenditures ...

Writing in the Wall Street Journal, Joseph Sternberg wonders whether the Federal Reserve is too insulated from politics. The Fed clearly failed by allowing the worst inflation we've seen in 40 years. Now, however, there are worries it's veering too far the other way: "the central bank could cast the economy into a recession for no good ...

Monetary policy, not supply chains or fiscal policy, primarily drove inflation. We live in an era of inflation revisionism. Commentators blame recent inflation on everything except loose money, and they credit recent disinflation to everything except tight money. According to the new thinking, supply-chain improvements explain why ...

There's been another bump in the disinflationary road. The Bureau of Labor Statistics announced the Consumer Price Index (CPI) increased 0.4 percent in February and 3.2 percent year-over-year, exceeding many economists' predictions. That's up slightly from January's 0.3-percent monthly and 3.1-percent ...

Writing in the Wall Street Journal, Mickey Levy opines that a stronger economy, fueled by productivity growth, might cause problems for the Federal Reserve. Levy, who is a member of the Shadow Open Market Committee, identifies the central bank's difficult task: "adjusting monetary policy to reflect the higher real interest rates that ...

Writing in The American Conservative, Rep. Josh Brecheen (R-OK) recently blamed inflation on irresponsible fiscal policy. He cites a barrage of statistics on the magnitude of the national debt, the looming insolvency of Social Security and Medicare, and the burdens high prices create for American households. Rep. Brecheen is partly ...

Now that Nobel laureate Joseph Stiglitz has declared victory for Team Transitory, it's worth delving into the causes of our recent inflation woes once again. Price hikes have indeed slowed, with the Consumer Price Index (CPI) and Personal Consumption Expenditures Price Index (PCEPI) declining from peaks at 8.93 and 7.11 percent respectively ...

Restoring timeless principles of economics within the academy will strengthen public discourse. When gasoline is expensive, people grumble that big oil companies like Chevron and ExxonMobil are colluding to keep prices high. They're wrong. The best way to understand why businesses aren't collectively fleecing consumers can be found in ...

Writing in the Wall Street Journal, Joseph Sternberg argues that the Fed's "decisions are inherently political and yet its democratic accountability is essentially nil." He's onto something. Our central bank has become increasingly partisan in recent years, and its overall competence has declined. Both in terms of democratic justifiability ...

After a scare with January's Consumer Price Index (CPI) release, economists and market watchers are breathing a sigh of relief following the latest Personal Consumption Expenditures Price Index (PCEPI) data. Both headline and core inflation (excluding food and energy prices) inflation were 0.2 percent in December. Year-over-year, the figures ...

The first price index release of the year brings some less-than-welcome news: Inflation has ticked up once again. The Bureau of Labor Statistics (BLS) announced the Consumer Price Index (CPI) increased 0.3 percent in December. Core inflation, which excludes volatile food and energy prices, increased the same amount. Over the last year, ...

Many influential figures claim that supply-side improvements explain easing price pressures. This view is especially common among those affiliated with the Biden administration. A few weeks ago, Treasury Secretary Janet Yellen said in an interview that "supply-chain issues that resulted from the pandemic…seem to be healing, and as that ...

Once a bastion of sound reporting, the Wall Street Journal's economy desk is slowly descending into incoherence. The latest confusion is Paul Hannon's article about inflation. His opening sentence is a whopper: "Extraordinary corporate profits were a driving force in last year's surge in inflation, a pressure that is now easing rapidly ...

Inflation rose slightly in November, according to the Bureau of Labor Statistics. The Consumer Price Index (CPI) grew 0.1 percent last month after remaining essentially unchanged in October. Year-over-year headline inflation was 3.1 percent; Excluding food and energy prices, it was 0.3 percent in November and 4.0 percent ...

Great news on the inflation front: According to the Bureau of Economic Analysis, price pressures have significantly eased. The Personal Consumption Expenditures Price Index (PCEPI) rose 3.0 percent year-over-year in October, down from 3.4 percent the month before. Continuously compounded, headline inflation was a mere 0.59 percent last month. ...

The economy desk at the Wall Street Journal is promoting supply-side disinflation. Some of their articles are quite bad. Others are more promising. Nick Timiraos, the Journal's chief economics correspondent, recently offered a nuanced perspective. Timiraos outlines the standard productivity-driven view of easing price pressures: The ...

In the Wall Street Journal, James Mackintosh argues the Fed doesn't deserve credit for the recent decline in inflation. Disinflation occurred "mostly because of things the Fed has no control over, as normality returned after the pandemic," he writes. Instead, supply-side improvements explain easing price pressures. The best that can be said ...

One sign is that banks are calling in loans without extending new ones. Ramesh Ponnuru thinks that monetary policy isn't tight enough yet. He worries, based on recent data on current-dollar GDP, that we are continuing in a persistently loose monetary environment. That means future economic pain is all but certain, whether in the form ...

The Federal Open Market Committee (FOMC) decided not to increase its interest rate target last week. The range for the federal funds rate remains 5.25-5.50 percent. While inflation isn't falling as fast as we'd like, the FOMC's caution is commendable. Monetary policy already looks restrictive by several measures. Admittedly, inflation is ...

Alan Blinder thinks American households and workers have never had it so good. But because they're trusting their lying eyes instead of experts like him, they're disgruntled about the economy. Why don't the hoi polloi appreciate that "unemployment is near record lows, net jobs are still being created at a breakneck pace, and inflation has ...

The US economy grew at a remarkable annualized rate of 4.9 percent this quarter, the Bureau of Economic Analysis reports. This was significantly faster than most analysts expected. Strong growth is good, but there's some less-welcome news, too: Nominal (current-dollar) GDP grew at an 8.5 percent annualized rate. The implied inflation rate, ...

Inflation remained high in September. The Consumer Price Index increased 0.4 percent overall during the month of September, and 0.3 percent excluding food and energy, the latest release from the Bureau of Labor Statistics shows. This corresponds to (continuously compounded) annualized rates of 4.74 percent and 3.87 percent, respectively. ...

We live in an era of macroeconomic superstition. Much of what commentators think they know about monetary policy just ain't so. A recent example is the purported link between economic growth and inflation. In a recent Wall Street Journal article, David Harrison warned that the Fed may continue "to fight inflation by slowing growth." The Fed ...

The Federal Open Market Committee opted not to raise its interest rate target at its September 20 meeting. The range for the federal funds rate remains 5.25-5.50 percent. However, several Fed officials hinted another hike could come later in the year. Do we need tighter monetary policy? The FOMC also released its latest Summary of ...

Former World Bank president David Malpass thinks government policy is the primary cause of inflation and slow growth. I agree, but not for the same reasons. Malpass makes three distinct arguments: Specific prices ("rising fuel prices and wage costs") are the chief source of inflation risk. Higher economic growth can help us overcome a host ...

Inflation is back! Or so the commentariat would have you believe. The Consumer Price Index (CPI) grew 0.6 percent in August, significantly higher than the previous six monthly increases. Consumer prices have grown 3.7 percent over the last twelve months. If prices were to grow as fast as they did in August for the next twelve months, the ...

Writing in the Wall Street Journal, Alan Blinder notes the ambiguities in Fed Chairman Jerome Powell's recent address in Jackson Hole: Powell can't give much forward guidance when he doesn't know what comes next. The Fed is truly data-dependent now, in a way it wasn't a year ago, and no one knows what the next few months will bring. ...

Slowly but persistently, inflation is falling. The Bureau of Labor Statistics announced the Personal Consumption Expenditures Price Index (PCEPI) increased 0.2 percent in July. Over the past year, prices are up 3.3 percent overall and 4.2 percent excluding food and energy. The backwards-looking figures, however, don't give us the best picture ...

The aimless drift of economic policy continues, as otherwise sensible economists push for the Federal Reserve to raise its inflation target to 3 percent. This will supposedly provide all the benefits of the Fed's current 2 percent target without incurring the costs (reduced growth, higher unemployment) of driving inflation down further. Even ...

A welcome stand against economic interventionism. Arguments for supply-side economics (as that term should be understood) are making a comeback, and that's good news. The conversation on boosting economic growth is redolent of the 1980s, when top-down planning gave way to bottom-up commerce. Unfortunately, high officials in the ...

"Predictions are hard, especially about the future," the old saw goes. We economists have not clothed ourselves in glory with our forecasts. Many economics commentators confidently proclaimed inflation would be "transitory." Instead, we got sustained price hikes, including the sharpest increases in 40 years. I myself was too sanguine ...

The Federal Reserve's monetary tightening appears to be bringing down inflation without imposing undue burdens on the real economy. The Consumer Price Index (CPI) grew at an annualized rate of 2.0 percent in July. Core CPI, which excludes food and energy prices, grew at an annualized rate of 1.91 percent. This is good news: High inflation ...

Writing in the Wall Street Journal, John Cochrane argues recent events vindicate the fiscal theory of the price level (FTPL). According to Cochrane, and other proponents of FTPL, inflation is caused by a decrease in the present discounted value of budget surpluses. The federal government's response to the economic challenges of covid ...

The Bureau of Economic Analysis announced the Personal Consumption Expenditures Price Index (PCEPI) rose 0.2 percent during June. Headline inflation over the past year was 3.0 percent. It was 4.1 percent with food and energy excluded. Encouragingly, the continuously compounded annual rate of change was under 2.0 percent last month, which ...

As expected, the Federal Open Market Committee raised its target for the federal funds rate. The new range is 5.25-5.50 percent. The Federal Reserve's continued efforts to bring down inflation are commendable. But there are real risks that it's gone too far, too fast. The most recent inflation figures help us understand how precarious the ...

Inflation is coming down, but the future of monetary policy remains uncertain. There's widespread disagreement about central bankers' next move. That includes some members of the Federal Open Market Committee, who wanted a rate hike in June. Inflation is coming down, but the future of monetary policy remains uncertain. There's ...

More good news on the inflation front: the Consumer Price Index (CPI) grew by only 0.2 percent in June. That corresponds to a 2.2 percent continuously compounded annual inflation rate, which is less than the 3.0 percent average rate over the last 12 months. Core CPI, which excludes food and energy prices, grew 0.2 percent in June and 4.8 ...

There's good news on the inflation front. The Personal Consumption Expenditures (PCE) Price Index grew at an annualized rate of 3.8 percent in June. The "core" figure, which excludes volatile food and energy prices, was larger at 4.6 percent. Broad-based pricing pressures remain strong. But at least things are headed in the right direction.
At ...

The US economy grew at an annualized rate of just 1.1 percent in the last quarter. Most analysts expected a figure in the neighborhood of 2.0 percent. Historically, 2.5 to 3.0 percent was considered feasible and healthy. We have a lot of ground to make up. Weak growth and high inflation call to mind the economic woes of the 1970s. But ...

Governor DeSantis recently took aim at the Federal Reserve, presumably to bolster his national-issues profile ahead of announcing a run for the presidency, which he is expected to do in May. He lambasted both Chairman Powell's leadership and the nascent moves towards a central bank digital currency (CBDC). DeSantis apparently wants to ...

Andy Kessler at the Wall Street Journal wrote an interesting column about the perils of stimulating demand in a supply-constrained environment. He argues, correctly, that expansionary monetary policy is more likely to create inflation when the economy's supply side is flagging. He exaggerates, however, the power the Federal Reserve (and ...

Finally, some welcome news on the inflation front: Core PCEPI inflation is down to 4.6 percent year-over-year, and 0.3 percent month-over-month, which is 3.6 percent annualized. PCEPI growth has fallen in six of the past eight months. Inflation expectations over the five-year and ten-year horizon have ticked up slightly, but are comfortably ...

Is fractional-reserve banking inherently unstable? Over at National Review, Edwin Burton, a visiting economics professor at the University of Virginia, argues that the "mismatch between the maturity of the source of funds and the maturity of the use of funds" creates a run-prone system. His argument, however, overlooks important contributions ...

Using monetary policy to support an already-stabilizing financial system would be a mistake. Amid lingering inflation and financial-market turmoil, the Federal Reserve raised its interest-rate target to 5 percent on Wednesday. To their credit, Chairman Powell and the FOMC (Federal Open Market Committee) were evidently more worried about ...

February's inflation data were an unwelcome surprise. The Consumer Price Index (CPI) grew at a continuously compounding annualized rate of 4.4 percent on the month. Core CPI, which excludes volatile food and energy prices, grew 5.4 percent. The Fed still has some work to do on the inflation front. Now it's dealing with banking troubles, as ...

Federal budget hawks are in a pickle. Having predicted nine out of the last zero debt crises, those of us worried about the trajectory of US government spending have the inevitable task of convincing the public that this time is different. It's going to be a tough sell, but we have to try. Uncle Sam's spending binge is unsustainable. It ...

In a recent article at Axios, Neil Irwin asks why interest rate increases haven't tamed inflation. Inflation remains high despite eight rate-hikes by the Fed over the past year. The latest personal consumption expenditure price index (PCEPI) data shows the price level rose 0.6 percent in January, which is 7.2 percent annualized. ...

Inflation has not primarily been caused by factors outside the Fed's control. Prominent Democrats are doubling down on the supply-side inflation narrative. At the semiannual monetary-policy report to Congress, there was a concerted effort to portray ongoing inflation as beyond the Fed's control. Supply-side inflation is possible, and in the ...

Hotter-than-expected inflation has rekindled fears about a wage-price spiral. Writing in the Wall Street Journal, Jason Furman argues the Fed should tighten even faster. The economy's "underlying inflation" is due to "extremely tight labor markets," he writes. Although Furman prefers the phrase "wage-price persistence," his position is ...

Inflation remains stubbornly high. The Personal Consumption Expenditures Price Index (PCEPI), which is the Fed's preferred measure of inflation, increased 0.6 percent in January, higher than most analysts had expected. Inflation increased slightly on an annualized basis, from 5.3 percent to 5.4 percent. Equities markets tumbled on the news, ...

The US economy added more than half a million jobs in January, significantly exceeding forecasters' expectations. A robust labor market complicates the narrative of an impending recession. But some commentators worry it might force the Fed into even-more-contractionary policy. Does the recent strong jobs report spell trouble for the ...

The Federal Open Market Committee raised its federal funds rate target by 25 basis points on Wednesday. It has raised its target by 450 basis points over the last year. In December, the median FOMC member projected the target would exceed 5 percent in 2023, but some think the Fed has already done enough to bring down inflation. Monetary policy ...

Economists use aggregate demand and aggregate supply (AS-AD model) to understand how inflation and real income growth are jointly determined. The four components of the model are: Aggregate demand (AD): gM + gV = gP + gY.Nominal expenditures growth (gM + gV) equals nominal income growth (gP + gY). Long-run aggregate supply (LRAS): gY = ...

An interest rate is a price: the price of rented capital. Alternatively, interest is the price of time. It's the cost borrowers pay to transfer purchasing power from their future selves to their current selves. Intertemporal markets are a crucial component of advanced market economies. For any society that expects living standards to rise ...

Despite years of unprecedented policies, the old economic relationships have reasserted themselves with bold familiarity. The post-Covid economy may seem like a new world. Look a little closer, however, and it's anything but. The most extraordinary thing about the U.S. economy is how ordinary it appears. Despite years of unprecedented ...

Thankfully, inflation is slowing down. Prices rose only 0.1 percent in November, yielding the lowest annualized inflation rate (7.1 percent) in a year. Core inflation, which excludes volatile food and energy prices, rose 0.2 percent (6.0 percent annual). While it's too soon to celebrate, there's hope for continued disinflation. Let's take a ...

Kevin Warsh, a former member of the Fed's Board of Governors, writes in defense of a central bank digital currency (CBDC) in the Wall Street Journal. Mr. Warsh believes we need a digital dollar to keep up with China. "U.S. policy makers should heed the moment and respond with a strengthened form of the dollar in service to the national ...

If we want to understand economic fluctuations and business cycles, we need a disciplined way of thinking about how the nominal economy (denominated in current-valued dollars, e.g. market prices and interest rates) interacts with the real economy (denominated in dollarless quantities, e.g. unemployment and output). Economists have a pretty ...

All government agencies try to maximize power and minimize accountability, but the Federal Reserve is in a league of its own. What began as a quasi-public clearinghouse with the limited function of stopping bank runs has evolved into a monetary-regulatory behemoth. Its sphere of influence has grown despite its failures, of which ...

Is economic growth inflationary? Many economic and political commentators think so. Nick Timiraos of the Wall Street Journal, for example, writes that "easier financial conditions loose monetary policy stimulate spending and economic growth." Some monetary policymakers agree. Mr. Timiraos later describes the views of a Fed official who ...

September's inflation numbers aren't good. Prices rose 8.2 percent year-over-year, down slightly from the last release, yet still painful. The biggest news is "core" inflation, which excludes volatile food and energy prices. Core inflation hit 6.6 percent year-over-year, the highest since 1982. High core inflation suggests price pressures ...

Can we reliably infer the stance of monetary policy from interest rates? Many market-watchers think so. They confidently claim that high rates mean money is tight, and low rates mean money is loose. Reality is more complicated. The relationship they describe only holds over short periods of time, and even then only under very specific ...

Is the Federal Reserve significantly tightening monetary policy? The conventional wisdom says yes. After a series of hikes, the Fed's short-run interest rate target lies between 3.0 and 3.25 percent. Many commentators are worried about turbulent asset markets and the prospects of rising unemployment. But other factors make the Fed's stance ...

Say what you will about Karl Marx, the man knew how to turn a phrase. His observation about history repeating itself, first as tragedy then as farce, surely applies to the ongoing failure of U.S. monetary policy. Alex Pollock's insightful essay reminds us that the Federal Reserve faced similar challenges in the past and overcame them with ...

When economists model the supply of a good or service, they usually describe how its availability on the market responds to its price. This requires making several assumptions about market structure, spillover effects between firms, and property rights enforcement, to name only a few. While the underlying principles of human action are the ...

The Fed can’t be left to police itself. If Republicans take control of Congress in January, taming inflation should be their top priority. Consumer prices rose 8.5 percent year over year in July. Other measures are somewhat less dire but still unacceptably high — the Federal Reserve's preferred index is up 6.8 percent and, food and ...

For simplicity and elegance, it's hard to beat the equation of exchange. MV=PY. Money expenditures equal the dollar-value of output. With four easy-to-understand variables, we get a highly useful framework for interpreting monetary policy. The equation of exchange is also readily modifiable into a testable theory. Assuming (1) stable velocity ...

The Federal Reserve should have a single mandate focused on price stability. Monetary policy affects total spending, what economists call aggregate demand. In the short run, the Fed can keep the economy at full employment by stabilizing aggregate demand. In the long run, the Fed only affects the purchasing power of the dollar. Thus, anything ...

The Price Stability Act of 2022, a bill before the House Financial Services Committee, would turn the Federal Reserve's dual mandate into a single mandate. Instead of maximum employment and stable prices, the Fed would shoot for stable prices only. Is this a welcome change? Without endorsing or condemning the bill, we can explore its costs ...

Inflation continues its relentless march, eating away at workers' wages. Consumer prices rose 9.1 percent year-over-year in June, the fastest since 1981. The median American household is now losing more than $2,700 per year in purchasing power. As always, regular Americans are stuck with the tab for reckless monetary and fiscal policy. The ...

Inflation is a moral question as well as an economic one, and the Bible has a lot to say. The Bureau of Labor Statistics announced this week that the consumer-price index rose 1.3% in June and 9.1% over the past year. It has been 40 years since Americans have grappled with inflation this high. This presents an economic problem but also a ...

Our inflationary trajectory looks increasingly grim, and recession fears are mounting. Commentators worry the Federal Reserve will only be able to control surging prices by depressing output and employment. Monetary policymakers seem willing to incur economic costs if it means taming inflation. As the Wall Street Journal's Nick Timiraos ...

There are many bad explanations for inflation. I address some of them here. So let's explore some better ones. They aren't iron-clad, but they make sense in terms of basic economic theory. As always, the place to start is the equation of exchange: MV=PQ, where M is the money supply, V the velocity of circulation (the number of times, on ...

A House bill that seeks to bring ‘equity’ and ‘inclusion’ to the Fed is a grave threat to responsible monetary policy. Amid the worst inflation in 40 years, Congress is considering a disastrous change to the Federal Reserve's mandate. Elected officials should be instructing the Fed to focus on price stability. Instead, they're trying to ...

"Milton Friedman isn't running the show anymore," President Biden memorably scoffed on the campaign trail in April 2020. More's the pity. With inflation raging, financial markets in turmoil, and production slowing down, we could use a healthy dose of Friedman's wisdom. Monetary policy especially needs a reset. The way we think about the ...

Can supply problems cause inflation? I think so. Some economists don't. They insist inflation, a general increase in prices, can only be caused by monetary expansions. At first, their argument seems strong. But it forces us to accept absurd conclusions, so I reject it. To be clear: I'm not asking whether supply problems are driving ...

Bad economic ideas can have a frustratingly long shelf life. Amid surging consumer and producer prices, the apparent tradeoff between inflation and unemployment has become a hot topic. There's just one problem: the tradeoff doesn't exist. Economists have known this for 40 years. Policymakers and commentators asserting otherwise should get with ...

Just twenty years ago, economists and bureaucrats triumphantly proclaimed the apotheosis of macroeconomic stabilization policy. The "Great Moderation" saw a long spell of full employment, income growth, and low and steady inflation. How we long for those days now! While labor markets appear healthy, this could quickly change. Meanwhile, ...

The Federal Reserve has lost its way. It's pressured by political forces that want it to try its hand at everything except ordinary central banking. Monetary policymakers seem more interested in talking about climate change and race relations than inflation. The Fed's modest tightening reflects a far too sanguine attitude towards ...

There is no inflation-unemployment tradeoff. Unemployment last month reached an historic low, but inflation remains at a 40-year high. The Federal Reserve’s mandate requires it to pursue both full employment and price stability. Fed officials are now scrambling to get a handle on inflation. However, commentators are worried monetary ...

What's the point of monetary policy? Why does the money supply ever need to change? After all, money is just a tool for making trade easier. Provided there's enough money to make transactions, it's not clear why we would ever need more of it. An economy's wealth depends on natural resources, labor, capital, technology, and legal institutions, ...

The Federal Reserve has a dual mandate: maintain stable prices and full employment. Central bankers conduct monetary policy to keep inflation low and predictable while promoting strong labor markets. At least that's what's supposed to happen. As we've learned the hard way, things work out quite differently in practice. The Fed dropped the ball ...

The Federal Reserve has lost its way. It's pressured by political forces that want it to try its hand at everything except ordinary central banking. Monetary policymakers seem more interested in talking about climate change and race relations than inflation. The Fed's modest tightening reflects a far too sanguine attitude towards ...

Everything old is new again: Inflation plagues the US economy. The Consumer Price Index is up 7.9 percent from a year ago. The Personal Consumptions Expenditures index is up 6.1 percent from a year ago. We haven't seen price pressures like these in 40 years. If we want to understand inflation, we need a framework to organize our ...

Broken fiscal and monetary policies are part of a single pathology. We need to tackle them both. The U.S. is trapped in a vortex of money mischief and fiscal folly. The problem is bad federal policy. Without binding rules on irresponsible spending and money-printing, American households and businesses will continue to suffer. Since the onset ...

Fiscal policy doesn't usually cause inflation. In the old-school Keynesianism model, deficit spending increases aggregate demand, raising output and prices in the process. But the evidence suggests this effect is minimal. Government spending, even if it's deficit-financed, shuffles around resources. It doesn't usually mobilize ...

The US is experiencing the strongest price pressures in 40 years. Financial and economic commentators are searching frantically for the culprit. Many on the right blame massive budget deficits. Are government budget deficits responsible for inflation? The logic is simple: when governments run deficits, they inject purchasing power into ...

The average inflation target has eroded the Fed's credibility. Quick as a flash, the Federal Reserve switched from dovish to hawkish on inflation. The Fed initially planned to wind down bond purchases by June of 2022 and raise its interest-rate target later that year. Now, the central bank says its balance sheet will stop growing in March, ...

Supply and demand is the heart of economics. It's essential for understanding nearly everything economists care about. Market prices and quantities, industry revenue, the distribution of income, the effects of tariffs–it all depends on supply and demand. The usefulness of supply and demand is most obvious in the case of microeconomics, ...

Critiques of national-conservative economics based on the 'knowledge problem' usually miss the mark. Driven by coalitional fissures, many conservatives are rethinking long-established principles. One of them is the primacy of free enterprise. Whereas it used to be conservative orthodoxy that allocating resources by markets rather than ...

Inflation is one of the most studied phenomena in economics. We have a pretty good idea of where it comes from and how it works. Unfortunately, a large knowledge gap remains between economists and the "man on the street." There are several persistent myths that just won't die. Let's see if we can put a few of them to rest. 1. Increasing the ...

Supply issues are mostly to blame for rising prices. Deregulation is a crucial part of the remedy. Inflation is higher than it has been in a decade, and households and businesses are fretting over their diminished purchasing power. Monetary-policy makers insist price hikes are transitory, but there is pressure on the Federal Reserve to ...

To fully understand it, we have to distinguish between its demand- and supply-side causes. 'Inflation is always and everywhere a monetary phenomenon," said Milton Friedman in 1963. This might be his most-quoted remark, and yet, strangely, those who invoke it usually omit the rest of the sentence: "And inflation can be produced only by a more ...

Inflation remains elevated. The market doesn't anticipate it will stay high for very long. But the abnormal price hikes we've seen so far have the economic and financial commentariat in a tizzy. The explanations for inflation are a combination of demand-side and supply-side factors. On the demand side, there's the Fed's continued ...

When politicians and regulators play games with bank supervision, ordinary Americans lose. The political contest over banking and financial regulation is heating up. What Columbia's Charles Calomiris and Stanford's Stephen Haber call the "game of bank bargains" is developing into a partisan tug-of-war. It matters little who wins, because the ...

If widely used, it would give the central bank unprecedented power over the financial system. The Federal Reserve plans to consider the idea of launching a U.S. digital currency. Central bank digital currencies are a hot topic among monetary-policy makers world-wide. More than 80 countries, representing 90% of the world’s gross domestic ...

At the end of July, yearly price increases reached 5.4%, fueling a new round of debate between inflation doves and inflation hawks. Doves suggest price hikes are a temporary blip that will recede once the production bottlenecks caused by the pandemic resolve. Hawks think a plummeting dollar is here to stay, pointing to the massive increase in ...

The battle between inflation hawks and doves is heating up. The year-over-year change in the Consumer Price Index is 5.4%, significantly above average. This figure, from the end of July, comes after several months of economy-wide price hikes. But does this portend high inflation for the foreseeable future? Or, will inflation come back down ...

Though a return to the old system isn’t likely, the Fed’s management of the fiat dollar has been worse. President Richard Nixon ended the redeemability of dollars for gold and ushered in the fiat money era on Aug. 15, 1971. Many economists look back on the occasion with delight, agreeing with John Maynard Keynes that the gold standard was ...

Inflation is the current hot topic in macroeconomics, to the extent anything in macroeconomics can be "hot." Financial, economic, and political commentators are in a tizzy over price increases. Even Fed Chairman Jerome Powell is starting to sound concerned, if his recent testimony before the Senate Banking Committee is any indication. We take ...

Like all forms of oppression, communism and democratic socialism belong in the dustbin of history. We may be witnessing the end of Communism in Cuba. On July 11, thousands of Cubans took to the streets to protest the island's appalling political and economic conditions. Some media outlets are trying to spin these as "COVID protests" rather than ...

The border crisis is a humanitarian disaster. Both parties are responsible. Democrats seem incapable of anything but publicity stunts, as evidenced by Vice President Kamala Harris's recent visit to El Paso, Texas. Republicans indulge in ugly nativist rhetoric, hiding behind law and order considerations when pushed. The constant partisan ...

Monetary policy isn't about interest rates. It's about money. Specifically, it's about the supply of money relative to the demand to hold it. But you wouldn't know that from financial journalists' constant focus on interest rates. Sentences like "The Federal Reserve lowered interest rates today," or "Yesterday, the Fed debated whether to ...

A specter is haunting the Federal Reserve: the specter of political activism. It's no secret that something strange is happening at the Fed. Visitors to the New York Fed's homepage are greeted, not with a description of the Fed's important monetary and regulatory mandates, but an affirmation of the Fed's commitment to economic justice. "We ...

The recent spike in inflation rocked financial markets. After more than a decade of modest price increases, April's 4.2% figure caught many commenters and policymakers by surprise. But inflation is the least of our problems. By focusing too much on the purchasing power of the dollar, we lose sight of the fact that U.S. monetary policy has ...

How worried should we be about the surge in inflation? Prices rose 4.2% year-over-year in April, sending investors and financial analysts into a tizzy. There are palpable fears we're headed for a sustained period of price hikes. Comparisons to the Carter administration are a dime a dozen. You won't find a harsher critic of ...

In fact, it might even have a few silver linings. The news that the Consumer Price Index rose 4.2 percent in the twelve months ending in April has shocked the financial commentariat. But such inflation is hardly inexplicable. Between President Biden's COVID-relief package and (much more relevant) the Federal Reserve's continued asset ...

Most wealthy countries today have central banks. And most of these central banks operate discretionarily. What this means is that monetary policymakers have significant latitude to determine the course of monetary policy. Although monetary policy is crafted using sophisticated economic tools, ultimately any policy decision in a ...

Keynesians have it backward: Growth is driven by production, not consumption. President Biden’s $2.3 trillion infrastructure plan has many economists excited for a return of old-school Keynesian splurging. “Fiscal policy is back,” Nobel laureate Joe Stiglitz cheered. “That will create more demand and that should give people more confidence ...

Accounting identities don't tell us how the economy actually works. Whenever the public discourse turns to economics, the results tend to be painful. Economists are forever pulling their hair out over the politicization of the discipline. But recently, things have gotten even worse than usual. It's no exaggeration to say today's ...

Why economics should be included in liberal-arts curricula. What is the relationship between economics and the liberal arts? This question has pestered me for years, especially given the politicization of the discipline. Both the Left and Right increasingly use economics as a cudgel in political battles. You have to wonder whether ...

The central bank is getting involved in too many things that have nothing to do with monetary policy. The Federal Reserve has lost sight of a fundamental truth: Monetary policy is about money. Instead, the central bank is pushing for major changes in policy areas that have nothing to do with money or financial markets. It’s time for Congress ...

Our central bank is conducting fiscal policy masquerading as monetary policy. Not so long ago, during the age of Milton Friedman, the chief concern of monetary policy was inflation. The Federal Reserve's job was seen as a balancing act: Too low a money supply would slow spending, and too much would erode purchasing power. Of course, given ...

Today’s researchers have tossed out price theory and don’t realize they’ve been politically compromised. William Allen, a professor emeritus of economics at the University of California, Los Angeles died Jan. 15 at 96. Few noted it, but Allen’s death was momentous. It represented a generational shift in the economics profession, one that bodes ...

Setting the record straight on interest rates. Among my ambitious New Year's resolutions, the most difficult is my commitment to kill the oft-repeated claim that the Federal Reserve sets interest rates. Wait, what? It is a basic truism of financial journalism that the Fed determines rates from on high. From the Wall Street Journal to the New ...

The private sector is leading us into the next space age. Despite ongoing political turmoil and a worsening public-health crisis, Americans can rejoice in their nation's triumphs in space. On Sunday, November 15, NASA's Crew-1 mission successfully launched into orbit. Atop a SpaceX Falcon 9 rocket, three NASA astronauts and one JAXA ...

Shelton would add much-needed viewpoint diversity to the Federal Reserve. It's make-or-break time for Dr. Judy Shelton, President Trump's controversial nominee to the Federal Reserve Board of Governors. Shelton's nomination had stalled after some Republican senators said they wouldn't vote for her. But on Thursday evening, Senate Majority ...

In August, the Federal Reserve announced it was embracing average inflation targeting. In targeting average inflation, the Fed will allow inflation to rise above 2% temporarily, to make up for periods of lower-than-2% inflation. Indeed, that is required to hit2% inflation on average. The Fed's previous regime, in contrast, did not target ...

Central bankers should stick to central banking. As negotiations over the next COVID-19 stimulus package flounder, Federal Reserve officials are pushing for greater fiscal support from Congress. Particularly noteworthy is Fed Chairman Jerome Powell’s call for more spending. “Too little support would lead to a weak recovery, creating ...

The Fed's new monetary framework is long overdue, but the central bank may prove incapable of hitting its inflation target. The Federal Reserve wants to go full steam ahead in keeping our economic recovery strong. The US central bank announced a switch to “average inflation targeting,” and even more recently reiterated its commitment to ...

John Maynard Keynes, the progenitor of modern macroeconomics, famously dismissed the gold standard as a “barbarous relic.” Commodity monies have been held in low regard by economists ever since. The disdain has spread to noneconomists in policy making circles, as well. Dr. Judy Shelton is a rare exception. She is a well-known defender of the ...

The late Richard Feynman, one of the 20th century’s eminent physicists, famously said, “Science is the belief in the ignorance of experts.” Unfortunately, the response of experts to the coronavirus pandemic has vindicated Feynman’s claim. Experts in the supposedly scientific fields of public health and economics have made a mess of things. ...