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The Federal Reserve is worried about inflation:
Fifteen years ago, Japan faced a problem: lower inflation, near-zero interest rates and limited ability to generate higher prices. Five years ago, Europe faced the same challenge.
The concern that haunts Federal Reserve officials is that they will be caught in a similar trap over the next decade. This concern drives their annual report, which occupies a central place with a two-day research conference starting Tuesday in Chicago …. "We are trying to find ways to make this 2% inflation target highly credible, so that inflation is around 2% on average, instead of just 2% in good times, and then less on average in difficult times, "said Fed Chairman Jerome Powell in February.
The fact that the Fed is "trying to think" about ways to increase inflation confirms what I have been thinking for a long time: they do not know how to do it. The central bank of Japan either. Or from Europe.
In theory, central banks are supposed to have absolute control over inflation. And in theory, it may be the case: flood the country with enough money for quite a long time and eventually, inflation will increase. But the amount needed in the face of a fundamentally deflationary economy is apparently so huge that in practice this is not always possible.
Most likely, it has something to do with the aging of the population. Japan came first, then Europe, and we are going in that direction as well. What is the answer to that?
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