Editor's Note: Dr. Richard Ebeling's latest book, Monetary Central Planning and the State, published by the Future of Freedom Foundation, is now available. The 228-page digital book is available for Kindle for only $0.99!

There is no way to describe current Federal Reserve policy other than as monetary confusion and misdirection. In a nutshell, Janet Yellen and the other members of the Fed's Board of Governors have no idea what to do. Do they raise certain interest rates over which they have some direct influence? Do they keep them at their current rock bottom levels, as they have for the last six years?

On the one hand, government-measured unemployment levels have fallen from their high of over 10 percent at the depth of the recent recession to 5.1 percent in September 2015.

However, there is an alternative measure of unemployment also calculated by the U.S. Bureau of Labor Statistics. It includes not only those currently unemployed and looking for work during the previous four weeks, but also "discouraged workers" who have stopped looking for jobs who would be interested in working if they found suitable employment and those who are part-time workers who would prefer to be employed full-time. If these two additional groups are included, the U.S. unemployment rate is 10 percent, double the headline "official" level of unemployment the administration touts as a "positive" sign of the economy's recovery.

On the other hand, price inflation as measured by the Consumer Price Index seems to be barely rising. According to the Bureau of Labor Statistics, price inflation in August 2015 was .02 percent higher than 12 months earlier.

Again, however, when food and energy prices are subtracted out of the Consumer Price Index to leave what the government statisticians call "core" inflation, prices in August were 1.8 percent higher than a year ago. Certainly not a "galloping" inflation, but not the nearly zero price inflation rate the headline number suggests, particularly since food prices were up 1.6 percent over the year; the "drag" on measured price inflation was all due to a 15 percent decline in energy prices compared to 12 months earlier.

No Trade-Offs Between Employment and Inflation

If we look at that alternative unemployment rate of 10 percent in conjunction with the "core" price inflation rate of 1.8 percent, what we see is a moderate form of what in the 1970s was called "stagflation": high unemployment with rising price inflation.

The Federal Reserve could try to nudge up the key interest rates it most directly has influence over, especially the Federal Funds rate at which banks lend to each other overnight, but with the risk of threatening the investment and home mortgage borrowing that it has attempted to "stimulate" through near zero interest rates.