The controversy over neutrality
ignorant about inflation
Chicago Fed President Charlie Evans says “2.5% is neutral at best” but neutrality isn’t good enough for him.
Evans wants a cap rate of 3.75% to 4.0%, and Evans is tossing some core PCE numbers as well.
The Fed and almost all economic analysts know nothing about inflation. The entire group views CPI, PCE, and other distorted metrics as “inflation.”
The results speak loudly. The Fed has blown the DotCom bubble, the housing bubble, and the everything bubble at a time in hopes of making up for the alleged lack of inflation.
Kiss Schiller house prices
I haven’t updated the main chart for 2 months but it clearly shows the problem.
All economic idiots focus on “consumer inflation” and completely ignore asset bubbles, especially housing.
Asset bubbles are generally hard to measure, but home prices are easy.
The Fed and most economists ignore home prices and call them a capital good.
Well, so what? Is the goal to measure inflation or to measure “consumer inflation”?
On top of the DotCom bubble, the Fed ignored asset prices. It’s hard to put an inflated number on speculation, but it’s been rampant for more than two decades.
Housing is different. It can be measured easily. But for two consecutive episodes, the Fed didn’t pay attention at best.
The right way to neutral
Neutrality is not meaningless, and yes it is constantly moving. This is why the Federal Reserve is constantly chasing its tail.
“What is the correct way to estimate a nominal neutral rate in a high inflation environment?” Nick Temeraus, chief economic correspondent for the Wall Street Journal asked Evans.
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He asked the wrong person and most importantly the wrong question.
The correct question isHow do we get to neutrality?“
Since the neutral is constantly moving, only the free market has a chance of finding it.
Instead, we have a group of economic group-thinking magicians who two years ago were begging for more inflation and now that they have it, they are equally clueless about what to do about it.
Ivory Jack’s Tower
The Fed is a surefire failure that does not understand bubbles, neutrality or inflation.
None of the Fed chairs have ever had a real job. They live in their ivory towers, set politics, and blow bubbles.
Their intriguing definition of a stable is the ever-rising 2% inflation that they don’t even know how to measure.
Mary Daly, president of the Federal Reserve Bank of San Francisco: “I don’t feel the pain of inflation anymore.”
Yesterday, Mary Daly, president of the Federal Reserve Bank of San Francisco, set the tone for the arrogance of the Ivory Tower.
When asked about inflation, Daly replied “I no longer feel the pain of inflation. I see prices go up but I have enough… Sometimes I decline to price things, but I don’t find myself in a place where I have to make the swaps because I have had enough, and many Americans have had enough. “
She said by chance how all Fed chairs probably feel.
When you live in an ivory tower and earn $427,000 a year, no, you don’t feel the pain of inflation. Unfortunately, most people do.
For discussion, please see Mary Daly, President of the Federal Reserve Bank of San Francisco: “I Don’t Feel the Pain of Inflation Anymore.”
This post originated on MishTalk.Com.
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