Logan: The case for modernizing the FOMC’s operating target rate

Dallas FED president Lorie Logan does not mention at all several important things:

1. Carter aimed at 4 to 5% as the inflation target
2. Reagan targeted rates below 4%
3. Clinton wished for 2 to 3%
4. Bush the younger had an inflation target of 2% where it stands today
5. Logan does not mention at all what her "modernizing the target inflation rate" actually means
6. We need to be conscious of the fact that the current inflation target of 2% is NOT a results of any scientific economic study but it was pulled out of the thin air. Thus, the target could be 1% or 3% just as well. The experts at the FED never say "I know that the 2% inflation target is correct because I studied this issue scientifically based on bona fide economic data." Chairman Powell says "we believe it is correct" (see his speech at Jackson Hole) or "we think" or "we believe."
7. While Joe Public is afraid of inflation and because of it he is afraid of his future, the low but positive inflation is a good thing as it protects us against the dreaded deflation whereby the prices start dropping uncontrollably, producers and retailers are not able to recover their costs and a waive of bankruptcies ensues.
8. Yet, the left wing pundits, based on their political bias rather than economic data have been able to persuade the Public, which is by definition not knowledgeable about economics and mathematics of inflation, that inflation is very high, prices are through the roof and "the economy is stagnating."
9. This would be a farce if it were not in fact criminal: It makes the nation of 339 million unhappy and most run to therapists who say they are booked for foreseeable future to soothe their worries, while the national economy is booming with the annualized growth of GDP at 3.8% quarter to quarter, GDP Price Index at 2%, PPI at 2.6% and CPI at 2.9%.
10. In the meantime, nobody is even thinking about the past economic data that shows all the products including food sans the housing that is a special case (due to a high demand and a 50% increase in square footage of houses in 50 years) are cheaper than 50 years ago as well as than 5 years ago adjusted for inflation. At the same time, the household income has been growing at a rate slightly exceeding the rate of inflation thereby slowly increasing the American standard of living that remains the highest in the world for the common man.
11. Thus, we have had the cumulative inflation of 520% over the last 50 years with the average annual inflation rate of 3.32% (1.0332 raised to the power of 50.5 years equals 5.20). This means that $1 in 1975 is worth $6.20 (not just $5.20) today. As an example, the average price of meat in 1975 was $1.80 a pound, which comes to $11.16 in today's money. But we buy Angus steak for $6.50 to $10 a pound, beautiful pork cutlets for $3.49 a pound and chicken drumsticks for as little as 99 cents a pound, the $400 a pound Japanese Kobe steaks for snobs notwithstanding.
12. Logan also does not mention the fact that the FED has never been good at judging the health of the American national economy. In the Spring of 2008, the FED pronounced the national economy to be in an excellent shape only to go bust a few months later in August 2008. In addition, I heard the "economic wizard" Senator Barnie Frank on TV in July 2008 that Fannie Mae and Freddie Mac were financially sound only for them to be bankrupt the following month.
13. Logan also mentions FED Chairman Greenspan. This is the guy who is now being credited with singlehandedly engineering the Great Recession of 2008 by keeping the interest rates low for too long thus creating a RE boom that ended in the bust of 2008. The Wall Street got into the act as well with its now banned Collateral Mortgage Loan Obligations and the Mortgage Backed Securities that made the bust only worse. Greenspan kept the interest rates too low just to stay of the good side of four presidents who were thus appointing and reappointing him. But the real culprit was the Clinton's Community Reinvestment Act of the late 1990s that made it possible for poorly qualified borrowers to obtain mortgage loans that started the RE boom right thereafter. In fact, in those days mortgage lenders were graded (received good Brownie points from regulators) according to how many mortgage loans they made to poorly qualified borrowers (who were presumed to be "disadvantaged.") The poorly qualified borrowers were frequently making mortgage loan payments from cash out refinancing for higher and higher amounts until the bottom fell out from under the RE market, the RE market became saturated as it always does, the property values declined, the poorly qualified borrowers could not refinance with cash out anymore and the bust set in. (Take it from me as I was running a mortgage loan company in those days and was right in the midst of this madness.)