Economic View – How a Little Inflation Could Help a Lot – NYTimes.com
Professor Sumner proposes that the Federal Reserve make a firm commitment to raising expectations of price inflation to 2 to 3 percent annually.
In his view, policy makers in Washington are doing too much with fiscal policy — overspending and running excess deficits — and not doing enough on the monetary side.
While his views are controversial, they are based on some assumptions that are not. It is commonly agreed among economists that deflation brings layoffs and sluggish investment.
via Economic View – How a Little Inflation Could Help a Lot – NYTimes.com.
Professor Sumner’s proposals may not be public policy now. But if there is one thing economists should know, it is that we should not underestimate the power of an idea.