In the dozen or so years until 2007, it had become as close to a global orthodoxy in economic policy making as we ever see: Central banks should target a low and stable rate of inflation.

This replaced earlier orthodoxies -- such as that central banks should maintain a fixed exchange rate with an ounce of gold, which was abandoned in 1971. Though inflation targeting left far more latitude for government officials to expand the money supply, it too ultimately proved too great a shackle on the exercise of central bank wisdom.

The U.S. Federal Reserve, the European Central Bank, the Bank of England and other rich-country central banks have generally made 2% inflation, give or take a smidge, the touchstone of good performance. Fed officials have for 20 years paid public obeisance to their statutory "dual mandate," to maximize employment as well as stabilize prices. But in practice, until recently, they treated it much like a mildly embarrassing biblical injunction that could be safely ignored, if not repudiated.

Yet one of the great attractions of inflation targeting was that it only appeared to constrain central bankers' discretion. Other objectives which today's central bankers actually think are far more important -- in particular, keeping growth of that great aggregate of aggregates, "gross domestic product," above 0% -- can be safely pursued in place of price stability.

This is because the inflation target is what's called a "medium-term objective." The Fed is actually free to slash its key interest rate from 5.25% to 2%, stuffing the world with dollars, even as inflation soars past 5.6% (a 17-year high), because the public's inflation expectations will supposedly remain "well anchored." That is, we will eventually stop charging and paying each other ever higher prices for stuff, in spite of the flood of Fed money, because we know that once the Fed prints enough of it to fix our problems it will get really mad over the inflation we produced and target it with a vengeance.