Without admitting it, the Fed is resisting deflation.
At The Economic Club of New York today, Yellen said the Fed has a reasonable expectation of rising inflation. Why this made equities move up is because higher prices (core inflation) will be rising against falling income for most people. This “whipsaw effect” supports the profit margin.
What is the objective, here?
Yellen said the market response to the Fed’s March meeting was positive. We are close to full employment, she says, and so we will have inflation, which is a positive measure she described as “favorable.”
Respectfully–that’s really messed up!
The Federal Open Market Committee is not acting to promote free-market economics.
There is nothing being done to adjust prices to income. Instead, the Fed is acting to “attain” its mandate, and remember, “attainment” is regulatory language for actively reacting to a nuisance value, which is a deflationary trend being positively measured as falling income against rising prices. In other words: income is being adjusted to prices on command (conforming to the mandate–the stated objective) instead of prices being adjusting to income on demand like in a real free-and-open market.
Let’s change the mandate.
Let’s have a confirmed, passive-pattern of resistance, with prices adjusting to income (disinflation rather than deflation) on demand.
(It is entirely possible to really have full employment with low inflation without commanding it. It is time to let it be.)
Vote For Bernie Sanders!