…and maybe pundits, too.

For the Federal Reserve, the aftershocks threaten to set back its path to interest-rate normality yet again….

That’s how Alex Frangos and Justin Lahart opened their Wall Street Journal piece Monday, writing of the People’s Republic of China’s (second in a month) “market” meltdown last week and with it the demonstration by the PRC’s economic central planners and their panicky twitchings with interest rates, bank reserve requirements, market interventions, and the like that, once again, central planning cannot seriously impact economies for longer than the moment.

Never mind that the PRC has little impact on the global economy—as Frangos and Lahart themselves note, PRC imports from the US run to 1% of our GDP and all of 2% of the S&P500 companies’ revenue are PRC-related. The situation is little different for Europe: most of those nations’ economic interactions with the PRC represent roughly 1% of their GDPs as well.

They added this to their fandango:

September is still on the table for the Fed, but markets will need to calm before then.

No, they don’t. The markets aren’t the underlying economy. The markets are tied to the economy by a stout rope, but that rope has large and nearly randomly variable slack. The underlying economy, slow as the Obama recovery has been, nevertheless is in solid territory, and as Frangos and Lahart themselves concede, “a US recession led by China doesn’t look to be in the cards.”

The Fed needs to move on the longer-term state of the economy, not on the short-term, animal spirit vagaries of the markets. The Fed needs to stick to a plan—any plan—and move interest rates up on schedule, which means in September. Or better, loosen and then release controls, letting interest rates float in those same markets—which for all their animal spirits influence still are better at “managing” a free market economy than any central planners, including those at the Fed—determine the appropriate interest rate levels.

And this:

[T]he Fed’s problem with China is what it will do to a pace of US inflation that already isn’t anywhere close to its 2% target.

No, again. The Fed’s problem has nothing to do with the PRC. The Fed’s problem is that US inflation isn’t anywhere close to its 2% target, and it’s not going to get there anytime soon. Interest rates are intrinsically inflationary; the only way to move our present inflation rate to 2% is to raise/let rise interest rates to levels consistent with 2% inflation rather than continuing to suppress the one (and so the other) to artificially low levels.