The low inflation in the United States tells us that resources are being wasted. What exactly are these wasted resources? There are multiple answers to this question – when demand is too low, lots of resources are left unused. But the biggest and most disturbing answer is our fellow Americans.
There are many productive people in the United States available to work more hours, and our society is deprived of their production. This key point is generally underappreciated. I’ve said that the FOMC is undershooting its price stability objective and is expected to continue to do so.