Target wages and income (US)...

Article;
Tolerating high unemployment inflicts huge damage on US economy.

Comment;

The policy makers have had a choice between lower prices and high employment. In the past (before recession) prices peaked as high as 6%, with oil, and the policy makers  chose high unemployment in favor of lower prices and price-stability, mainly... What high unemployment did, it stroked income and demand negatively. It was the choice of the policy makers... they knew that the past monetary policy inflated the bubble. They said… “let bubble burst and they will clean up the mess later”… Had the central bank increased interest rates to deflate the bubble there would not be that severe demand slump coupled with liquidity-trap... It (higher interest rate) would have helped both... The central bank failed to send the right-signals to the economy… nevertheless they succeeded in lowering the prices… But then again, to break liquidity-trap, the Fed adopted the task of inflating expectations and started its QE programme. It wanted the public to believe that prices will rise and not fall since falling prices foster more falling prices expectation… They tried to reinforce an expectation so that people do not accumulate currency in the expectation of fall in the general price-level. The QE programme was a partial success in inflating the economy but failed to dent unemployment with a considerable gap... Demand is created when income rises, and, both the Fed and the US policy makers should try to affect the same (income) variable but more directly… Fiscal policy could be a direct option, a direct boost to employment, income and demand… but the government is debt constrained but, again the ZLB and liquidity-trap is a good opportunity to borrow and spend... The policy makers should target wages and income since there has been a consistent real-wage-product gap since 1970s… Deflation could have helped in increasing real-wages and demand through the Pigou-Effect but by adopting inflation targeting it (the Fed) has missed that train…