Dear Editor,
Recently, CNN stated that “US inflation remains at 2.7%, underscoring persistent cost of living challenges.” That’s like saying “Johnny only earned an A- on his last math class exam, underscoring his persistent learning challenges in math.” The point being that the policy of the Federal Reserve is to not allow the rate of inflation to drop below 2.0%. Should that happen, the Federal Reserve would take immediate action to get the inflation rate back up to 2.0%. The reason being that given an even minor drop in inflation below zero percent, i.e., deflation, encourages hoarding cash which rapidly triggers a self-reinforcing downward spiral in consumer spending, initially on consumer durables. This results in employment layoffs in the manufacturing industry and shortly thereafter, bleed over to employment layoffs across all industries and with that, placed the economy into a severe economic recession. In other words, an inflation rate of 2.7% reflects nearly perfect performance on this aspect of the federal government’s management of the economy.
Toby Tatum
