The Cult of "Price Stability" Is Killing American Workers by Yglesias

My first introduction to the mysteries of monetary policy came when I was maybe 15 or 16 in the mid-to-late nineties and I was scanning the newspaper over breakfast. I saw a story about a strong Employment Situation Report from the BLS and how it sent the stock market falling in response because markets were anticipating a rise in interest rates. Why, I asked my dad, would an increase in employment be bad? He explained that when too few people were unemployed, the Federal Reserve tended to get worried because with so few unemployed people around workers would start agitating for higher pay. And higher pay leads to inflation. So it's important for the Fed to respond to low unemployment with high interest rates to push unemployment higher and prevent wage gains. This sometimes has the incidental impact of causing stock prices to fall.

That sounded insane to me, and my dad agreed that it was insane and explained that executive of the modern state is but a committee for managing the common affairs of the whole bourgeoisie.

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Now don't get me wrong. The moral of the story isn't that inflation per se is a good thing. But if you watch Kevin Durant play a whole season of basketball and his free throws never miss to the right, that's not a sign of shooting skill it's a sign of shooting error. Some misses are inevitable, but you want the misses to be roughly symmetrical because you're aiming for the hoop. If all your free throw misses are misses to the left, something's going wrong.