Per Larry Summers (quoted in Robert Armstrong’s FT piece)
“The first edition of Paul Samuelson’s textbook [Economics from 1948] had a graph of the price level, not the inflation rate. If you think the price level is mean-reverting [as it would be on the gold standard], when you have more inflation, you expect more deflation. “
How that’s changed: Bouts of deflation were expected, after bouts of inflation. Both could spiral out of control, and the Fed was explicitly mandated to target “reasonable” price stability with a mean target of zero inflation.
Now the prevailing belief seems to be that bouts of modest “mean reverting” price declines will inevitably lead to collapses and that permanent 2% increases in prices are essential.
But where o where is the evidence for this (or the legislative mandates reflecting the will of the public)? That the gold standard is, desirably, defunct is no argument for the desirability of the shift, though as Larry points out, it may be an explanation.