The Fed is picking a price index that reveals imbalances. That is its theory, there exists a price index that is a strong indicator of monetary imbalances, find that index.
How does the right index relate to something called inflation? In two steps, when imbalances are not corrected, they grow and cause too many defaults, we get a Nixon Shock. Nixon shocks are MMT moments that directly dump inflation. And that is what is happening.
Much of the institutional money it taking the long term 60 year bet, by function and regulation, these are the pension systems. When they take that long bet, their models force investing onto a more price neutral condition, they are containing more of the total variance in their model, and can see ahead to Japan style deflation.
Pensions look at the complete spectrum, the Fed is concerned with the shorter recession cycle. The answer to the riddle: "Is all inflation a monetary phenomena?", the answer is yes, it is the left overs from monetary regimes change.
The Fed is not looking at that, has no effect on that, now. The Fed is picking an early warning index, nothing more.
How would a tribe of ergodics set the inflation rate? Simple, set the seigniorage to a flat half point and be done with it. The monopolyfee still exists, the markets are not dense, but they are complete.
We not be ergodic, the monopoly fee is ultimately a default bet, a bet that Congress will default a half point a year on bad projects. We are not ergodic, we send the map and tolerate a bit more asymmetry when the colors are setting sample rates.
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