Even 2% Inflation Is Too Much

Published in The Wall Street Journal.

As you suggest in “Getting Used to 3% Inflation” (Review & Outlook, Oct. 25), 3% is a lot of inflation, much worse than 2%, which is already too high. At a sustained 2%, which the Federal Reserve promises, average prices will nearly quintuple in 80 years, and the dollar will shrink to a value of 20 cents. At 3%, it’s worse: Average prices will multiply more than 10 times, and the dollar will reduce to 9 cents. Neither satisfies the goal of “stable prices” assigned by the Federal Reserve Act. As the great Paul Volcker wrote in his autobiography, “The real danger comes from encouraging or inadvertently tolerating rising inflation and its close cousin of extreme speculation.”

Alex J. Pollock

Mises Institute

Lake Forest, Ill.