Arguments for tight money often rest on claims that inflation, even at low rates, is a slippery slope: say that 2 percent is OK, then people will make the case for 4, then 10, and before you know it we’re Weimar. It’s not clear whether that has ever really happened: actually existing Weimar, like all hyperinflations, was a byproduct of political chaos, and the 1970s had as much to do with oil shocks as with policy misjudgments. In any case, it’s certainly nothing we’ve seen in advanced countries for a long time.

Almost five years ago, however, I started worrying about the opposite problem — the slippery slope of disinflation. We already knew from empirical evidence that prices were sticky enough to prevent full-bore deflationary spirals; but that very fact could lead to another kind of trap, in which policymakers and pundits start to treat below-target inflation as OK, and invent new rationales for raising interest rates. I wrote this:

And this raises the specter what I think of as the price stability trap: suppose that it’s early 2012, the US unemployment rate is around 10 percent, and core inflation is running at 0.3 percent. The Fed should be moving heaven and earth to do something about the economy — but what you see instead is many people at the Fed, especially at the regional banks, saying “Look, we don’t have actual deflation, or anyway not much, so we’re achieving price stability. What’s the problem?”

The numbers and dates aren’t right, of course — it was an illustration, not a prediction — but it’s pretty close to what Martin Feldstein is saying, with the addition of the financial stability scare. Now Tony Yates catches Andrew Sentance taking below-target inflation as a reason for opportunistic disinflation — we’re so low, why not go for zero?

The answer is that central banks have a 2 percent, not zero, inflation target for a reason — actually two reasons. (Amongst their reasons are surprise — surprise and fear — surprise, fear, and a fanatical devotion to …) As I tried to explain in my paper for last year’s ECB conference, positive inflation helps both with avoiding the zero lower bound (which isn’t as binding as everyone thought, but there are still limits to rate cuts) and with limiting the problems caused by downward nominal wage rigidity. And the experience of the past six years has made those concerns stronger, not weaker:

The bottom line here is that the arguments used in the 1990s to argue for a positive inflation target rather than literal price stability now tell a significantly different quantitative story from what they used to suggest. Pre-2008, those arguments suggested that 2 percent inflation was probably enough to eliminate most of the damage caused by the two zeroes; that is no longer true.

So the arguments Feldstein and Sentance make were the subject of extensive prebuttals, years ago. It’s actually kind of annoying to see them being rolled out as if nobody had thought about this before.