We spend a lot of time picking on the columnists at the New York Times business section, particularly Ben Stein and Gretchen Morgenstern. They can be fun to read simply because they are often so laughably wrong. But, laughing aside, the best economic columnist at the Times doesn't write for the business section at all. He writes for the Op-Ed page as an occasional contributor and his name is James Grant.
This past Sunday he delivered the not-exactly laughable message that pushing down interest rates to below the measured rate for inflation is not exactly a way of building a healthy economy.
Last week, as the Fed delivered its emergency cut of three-quarters of 1 percent, dropping the funds rate to 3.5 percent, the cost of living was rising on the order of 4 percent a year. Yet inflation was almost an afterthought in the press release in which the Federal Open Market Committee, the central bank’s policy-making arm, explained its surprise intervention: “The committee expects inflation to moderate in coming quarters, but it will be necessary to continue to monitor inflation developments carefully.”
If stability leads to instability, it follows that instability will eventually restore tranquillity. But first must come the tallying up of the errors, misjudgments and outright criminality that blossomed during the Great Moderation. Mr. Bernanke, in an attempt to limit the damage and hasten the healing, is likely to keep the Fed’s rate low — lower, even, than the measured inflation rate.
Paying the Price for the Fed’s Success [New York Times]