The Fed's Dual Mandate And Little Chocolate Donuts

First, I apologize for not getting an article out over the last two weeks – 08 AUG and 01 AUG.  Something came up at work that required me to work both weekends.

In any event, this week’s article discusses the Fed’s dual mandate of ‘low inflation and high employment.’  It is argued that the Fed’s dual mandate makes about as much sense as training for the Olympics while eating nothing but ‘little chocolate donuts.’

http://www.the92ers.com/blog/little-chocolate-donuts-olympics-and-feds-dual-mandate

For those of you considerably younger than I am, the reference to ‘little chocolate donuts’ goes back to a Saturday Night Live sketch of the late 1970s.  The sketch featured John Belushi as an Olympic decathlon champion who claimed he owed all his success to feasting on little chocolate donuts. 

Jokes aside, the dual mandate gives the Fed a built-in excuse for those times inflation spirals out of control.  When challenged about an out of control inflation, the Fed can always offer the excuse, ‘we were trying to achieve the full employment mandate.’  Moreover, an atmosphere of high inflation isn’t conductive to high levels of employment anyway.  Real, sustainable economic growth and the capital investments that sustain this growth require low inflation.  In an atmosphere of surging prices, businesses don’t have the confidence needed to make decisions on investments that might have economic lives of twenty years or more. 

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