I was listening to NPR this morning, and talk, of course, was of the employment report, most importantly as a signal about when the Fed would raise interest rates. This is an example of one of my rules: If people are debating it on NPR, we have already failed.
How bizarre is it that the health of the entire economy hinges on this one price that we set by committee? Of course we are constantly on a knife's edge, fearing economic dislocation. That's what happens when you set the price of something by committee. It will be wrong, because that's not what a price is. A price isn't something you set. A price is something you observe.
Sure, it looks like prices are set. It also looks like the sun goes around the earth.
So, we have this one thing, currency, that is provided by government monopoly. It doesn't have to be. It hasn't always been. But it is. And we manage the production of that currency by targeting the price of very short term credit. We don't have to do it that way. The connection between that price and the stability of the currency isn't even particularly easy to track or manage. But we try.
Do we need to live in a world where I have to track the mood of this committee? Why not have a world where, like with the price of bananas and haircuts, we observe the prices instead of trying to reverse engineer them on radio talk shows?