HAS THE FED REACHED A DEAD END?
Is more inflation desirable? Those at the Federal Reserve seem to think so, and they have explicitly said their target is 2 percent, or about double the current level.
Why would they argue for a further erosion of the purchasing power of the dollar? It is on the misguided belief (i.e., the long-discredited Phillips Curve) that moderately higher levels of inflation lead to higher levels of employment.
The unemployment rate numbers indicate that the United States is now at what was traditionally considered full employment — yet the number of people working as a percentage of the work force is close to a three-decade low.
Employers have not had to raise most wages, particularly for the unskilled, because there is such a large pool of unemployed or underemployed people ready to enter the work force when they see the right opportunity.
What you see in the chart above is the dead end the Fed has reached. Here’s why.












