Jerry Jordan

If I were going to do surveys about wage cuts or increases of the sort that Janet reported on, one of the surveys I would want to conduct is to ask people as we approach the end of this century to choose between two things. If the central bank had an objective of reducing the purchasing power of the dollar to 13 cents or 7 cents over the next century, which would you prefer? I would expect the majority of the responses to be, why are you going to reduce it at all? Explain to me why the dollar is not going to purchase the same at the end of the next century as it does today. The difference between 13 cents and 7 cents is the difference between a 2 percent rate of inflation and a 3 percent rate of inflation over 100 years. I think most people would view that as a silly alternative. They would say, why not zero inflation.

Each member of the Committee is, by design, an independent free agent. While the will of the majority always prevails, each member must be prepared respectfully to disagree. As Darryl [Francis] demonstrated, the maverick, the dissenter, the sometimes-lonely voice in the crowd, plays a vital role in the continuing evolution of policy thinking and policy making.

There is nothing inherent in our objective for price stability and what we are trying to do about the purchasing power of money that says that when we have a favorable supply shock we should raise our money growth objectives. There’s no more reason to do that than to cut the money growth targets if we had an adverse supply shock.  We wouldn’t do that. I’m sure that back in the 1970s or the 1980s we didn’t argue for lowering our targets. What we want to do is to view the transitory effects of the acceleration in productivity growth in a lower reported rate of inflation or transitory decline in the price level as an increase in the purchasing power of money. It would be a one-time decline in the price level--I don’t want to use that “D” word. And then when the supply shock goes away, we would return toward the sort of balanced equilibrium that we would have been in.