Zero Inflation Is Not Worth The Risk

The death of inflation is fast becoming a fashionable topic of debate in the corridors of Washington and the halls of academe. Zero inflationists are battling New Economy types for control of policy. Both believe they know the elixir for faster economic growth. The zeroes, who include several regional Federal Reserve bank presidents and congressional conservatives, want to hike interest rates sharply to get to zero inflation now. The New Economy wing, which includes Fed Chairman Alan Greenspan and the National Association of Manufacturers, believes that new technology and global markets allow the U.S. to aim for faster growth with low-enough inflation. We think the zeroes are well-intentioned, but the New Economy folks are on target. This is not the time to stomp down hard on the economy.

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