Imagine if AI lives up to even a fraction of what people like Elon Musk and Vinod Khosla speculate. Machines doing and thinking for us will power economic growth that will make the best of the present appear pedestrian by comparison. If so, picture the meetings at the Fed, staffed by economists who believe near monolithically that economic growth causes inflation.
Wall Street Journal Fed-watcher Nick Timiraos reports that “Doubts Arise On Growth-Inflation Link” as inflation doesn’t rise amid unemployment below the 4.9% rate that economists think is inflationary, and then (try not to laugh) GDP growth of the 1.8% variety that economists say exceeds the “long-run potential growth rate” beyond which inflation apparently must rear its head. In their embrace of worthless measures like GDP and unemployment, economists find themselves questioning their beliefs.
That’s fine, but GDP growth and rates of unemployment would never be the reason to question the Phillips Curve. Simple logic indicates that there’s no link between growth and inflation, and there never has been.
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