(2) Why Isn't Inflation Higher?

Image credit

Why isn't inflation higher? 

The answer is: inflation targeting. 

Before the age of inflation targeting, macroeconomic policy was dedicated to maintaining full employment. 

Inflation targeting, the new paradigm, which has been adhered to since the early 1990s, is based on the belief that a low but stable inflation rate is the most desirable macroeconomic objective. Under the new paradigm, governments are willing to honour the inflation target fetish at the cost of rising unemployment or levels of unemployment higher than necessary. 

We are dealing with a fetish similar to the EU's Maastricht criteria which have been plucked out of the air only to be worshipped like a totem, while costing millions of unemployed and impoverished people dearly. 

To keep inflation within the vicinity of the target, policy makers deliberately curb economic activity, subjecting the economy to an austerity bias and suppressing potential output. The control knob by which inflation is keep low and steady are the unemployed, the underemployed and everyone weakened and challenged unpleasantly by an economy made to perform worse than it could.

In the Year of the Lord 2018,  we really behave not much differently than members of a primitive tribe that believes in voodoo. 

However, we are much richer than theses tribes. 

Therefore, we are better able to afford costly blunders like the EU, inflation targeting or the primitive religious belief that man can control the earth's climate by manipulating a single knob (CO2) - when, amid a plethora of natural climate drivers (not controlled nor controllable by man), CO2 has virtually no influence on climate. 

Continued here.