For several years now the small coterie of Keynesian academics and apparatchiks who have seized nearly absolute financial power through the Fed’s printing presses have justified the lunacy of unending ZIRP and massive QE on the grounds that there is too little inflation. The bureaucrats at the IMF even invented a lame-brained catch-phrase, calling the purported scourge of money which retains most of its value “lowflation”.

This whole consumer inflation targeting gambit, of course, is an inherently preposterous notion because there is not a scrap of evidence that 2% consumer inflation is better for rising living standards and societal wealth gains than is 0.2%. And there is much history and economic logic that points in exactly the opposite direction.

Between 1870 and 1913 in the United States, for example, real national income grew at 3.5% per year—the highest gain for any 43 year period in history. Yet the average inflation rate during that long period of capitalist prosperity was less than 0.0%. That was real “lowflation”, and it was a blessing for the average worker, not a scourge.

But this week the BLS itself let out a screaming, never mind! The core CPI for the 12 months ended in January rose by 2.21% and that’s actually a tad higher than the 1.98% annual average since the year 2000.

Please forgive the spurious accuracy of reporting the BLS’ noise-ridden, dubiously constructed CPI to the second decimal point, but it’s meant to underscore a crucial truth. Namely, there ain’t no inflation deficiency problem and never has been!

The whole 2% inflation mantra is just a smokescreen to justify the massive daily intrusion in financial markets by a power-obsessed claque of monetary central planners. They just made it up and then rode it to ever increasing dominance over the financial system—even though as recently as 15 years ago the 2% inflation theory was unknown outside a small circle of neo-Keynesian academic scribblers led by Ben Bernanke.

In fact, the whole cockamamie theory was explained in an obscure book called “Inflation Targeting” issued in November 1998 by Bernanke and two other academic power grabbers: Frederic Mishkin, who later was appointed to the Fed and became a principle proponent of the Wall Street bailouts in 2008; and Adam Posen, an academic (well)stuffed shirt who peddled the same nonsense at the Bank of England and has been an incessant voice urging the BOJ to print more and still more money.

You can look it up. The book stands at #2,503,823 on Amazon’s sales ranking!

Yet inflation targeting is now accepted as gospel by the financial press, and it’s not hard to understand why. Wall Street loves it because it justifies massive liquidity injections, free carry trade money and wealth effects based market propping by the central bank. So the lazy journalists who feed the street with so-called financial news just xerox the mantra and pass it along unexamined, as in this gem out of Dow Jones MarketWatch:

Although too much inflation is viewed as dangerous for the economy, Fed officials think that a 2% inflation rate is best for the economy to grow……..Inflation has been trending below that target for the past four years.Low inflation is a signal of weak demand in the economy and raises fears of actual decline in prices or deflation, which can damage an economy, especially one with high debt burdens like the United States.