Yet another...

...paper making the rounds that demonstrates a particularly virulent form of mission creep infects the Fed. Maybe Seth Klarman is right with respect to the Fed's willingness to collapse "redistribution" and "social planning" into its well-known dual mandate of full employment and price stability. I will refrain from plucking the low-hanging fruit and comparing the language to Soviet-era planning conventions. (or maybe I won't...)

With the Fed going full "Unicron Mode" and gobbling up all the duration within sight, I suppose its quest to set negative real rates needs some intellectual support.  So this sort of tract is inevitable given current Fed policy.

An optimal level of capital exists for every level of social redistribution. When the young have more influence in the planner’s optimization problem, wages are high and the return from capital is low; and when the old have more influence in the planner’s optimization problem, wages are low and the return from capital is high. A critical feature of the planning problem we study is whether the planner can redistribute resources by means of lump-sum taxes or transfers. In the absence of lump-sum redistribution, we show that the planner might wish to use inflation or deflation to change the relative price of capital to induce young households to hold the right amount of capital. In general, the constrained redistributive solution is not fully efficient. That is, the implied level of savings is either too low or too high compared with the unconstrained efficient solution. In this sense, inflation or deflation will turn out to be an imperfect substitute for a full system of lump-sum taxes and transfers.