Bullard on inflation
- Inflation expectations are lower since Fed hikes
- Fed's inflation misses add up, undercut credibility
Bullard is a joke in central banking circles because he's been all over the place on so many issues but he's right about this.
The academics at the Fed don't understand that globalization and automation are game changers and that the 1980s models on domestic inflation don't work.
In the Globe & Mail today, there's a good argument against the old model that the BOC is also following.
"If the economy were indeed allowed to operate at capacity in terms of very low unemployment, it could well be that companies would respond by making new investments in capital and skills to raise productivity," Andrew Jackson writes, arguing against the old Milton Friedman models. "The main point is that the model of low unemployment inevitably leading to high and rising inflation is based on a lot of debatable assumptions that have not been tested against reality in many years."
