The old model is broken
The WSJ today writes about the Fed’s struggle to understand what’s happening with inflation. The 20th century model was all domestic. When the labor market tightened, it drove more demand for goods and prices rose. It’s the basic Phillips Curve.
However US inflation is now stuck under 2% despite record employment and a growing economy. The answer is obvious: the combination of globalization, automation and deunionization have made it possible to produce and/or import an basically unlimited amount of consumer goods without causing inflation.Elsewhere, technology has expanded access to raw materials.So the Phillips Curve now […]
Full Post at www.forexlive.com