To avoid stagflation and the associated loss of public confidence in our country now, the @federalreserve has to do more than merely to adjust its policy dials — it will have to head in a dramatically different direction.
My @PostOpinions column:
Central to fighting inflation is showing that a new paradigm is in place — and so far, the Fed hasn't been willing to do what's needed.
Current inflationary conditions are not as bad as those Volcker inherited as Fed chair in 1979, but they are the worst since then.
To prevent inflation from metastasizing, Powell & his colleagues need to be absolutely clear on two propositions that Volcker took as axiomatic.
First, price stability is essential for sustained maximum employment, while overheating the economy leads to stagflation and higher levels of average unemployment through time.
Second, there can be no reliable progress against inflation without substantial increases in real interest rates, which mean temporary increases in unemployment. Real short-term interest rates are currently lower than at any point in decades.
Central to success in fighting inflation is establishing credibility that a new paradigm is in place. Recognizing failed strategies, and then abandoning them, is the first step.
Paul Volcker would not have had to put the economy through the wringer if his predecessors had not lost their focus on inflation.


When the long-awaited process of raising interest rates begins tomorrow, market observers will fixate on the precise words used in the @federalreserve statement and during Chair Jerome H. Powell’s news conference.
The hope is that the Fed can engineer the proverbial soft landing, whereby inflation returns to around its 2 percent goal and the economy remains strong without a substantial increase in unemployment.
Judging by their statements to date, Powell and his colleagues seem to believe they have a good chance of success.
Anything is possible & wishful thinking can sometimes prove self-fulfilling.
I believe the Fed has not internalized the magnitude of its errors over past year, is operating w an inappropriate & dangerous framework & needs to take far stronger action to support price stability.
The Fed’s current policy trajectory is likely to lead to stagflation, with average unemployment and inflation both averaging over 5 percent over the next few years — and ultimately to a major recession.


My latest piece @PostOpinions | The stock market liked the Fed’s plan to raise interest rates. It’s wrong.
I fear the economic projections of the FOMC represent a continuation of its wishful and delusional thinking of the recent past.


In a world where financial crises are always possible, the credibility of the Federal Reserve is a precious asset. It should not be lightly sacrificed.
Our democracy is more threatened at home and abroad than at any time in the past 75 years. Rampant populism is a product of inflation and distrust in government. The Fed is outside of politics but not our civic life.
It has an obligation to display more intellectual rigor and honest realism than it did this week.

さらに、こちらこちらのツイートでリンクしたAlex Domashとの共著の小論では、今のままでは1-2年以内に景気後退に陥る可能性が高い、という分析結果を示している。以下はその小論の冒頭と末尾。

As the Federal Reserve moves this week to raise interest rates by a quarter of a percentage point, there is much discussion over the likelihood that the central bank can achieve a soft landing in the economy. While engineering a soft landing is historically very rare, Fed Chair Jerome Powell told lawmakers in early March that he believes achieving a soft landing is “more likely than not.” The Fed’s latest forecast, as well as the consensus forecast from the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters (SPF), supports this claim: in both forecasts, inflation recedes to below 3 percent and unemployment remains below 4 percent over the next year.
To examine the plausibility of these forecasts, we look at quarterly data going back to the 1950s and calculate the probability that the economy goes into a recession within the next 12 and 24 months, conditioning on alternative measures of inflation and unemployment. We find that, given the current inflation level of nearly 8 percent and unemployment below 4 percent, historical evidence suggests a very substantial likelihood of recession over the next year or two.
Overall, the evidence we present in this note suggests that engineering a soft landing is a very difficult thing to do in a rapidly growing, inflation economy. Arguably the only time the Fed has been successful in achieving a soft landing occurred in 1994-1995 when the Fed doubled interest rates to 6 percent and was able to slow economic growth without triggering a recession.
But with inflation nearing 8 percent and unemployment below 4 percent, the Fed today is way behind the curve, and now has to play catch-up to try to tame price increases. The historical evidence indicates that when inflation is as high as it is today, and the unemployment rate is as low as it is today, the probability of a recession over the next one and two years is extraordinarily high. Moreover, none of this evidence accounts for the recent supply shocks associated with the war in Ukraine, which will only increase the probability of recession even further. We therefore believe that the likelihood that the Fed achieves a soft landing in the economy is low.