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"From an economist’s point of view, this paragraph is very hard to understand. Real GDP and productivity statistics are calculated after adjusting for price ch

• grandalf 12y ago
  > they are unaffected by inflation or deflation In other words someone picks a basket of goods and those price changes are measured. Economists have every incentive to get this right. I think they probably do, but if you see the world progressing in a "singulatarian" way toward exponential growth in many areas, it's unlikely that the basket of goods chosen accurately tracks the broader trend. Also, if such a singulatarian world is happening, economists, by virtue of not believing that to be the case, would correct for those goods when formulating the basket used to track price changes. One final point: There are enough seemingly price-stable goods where the prices are actually the result of factors other than pure supply and demand (such as unknown risk premiums, etc.) which if they end up in the basket of goods could cause systemic bias, since those risk premiums may not be structurally stable in either direction. From a policy perspective, we must recall that interest rates are a blunt instrument and it has been a major goal/concern of the Fed to come up with other, smaller knobs to turn. One of these is QE policy, others are regulation and enforcement mechanisms that impact capital flows in a broad way (but less broadly than interest rates).