Other writing by
walt
Tags
Investing, Stocks, Economy, Apple, Real estate, Google, Value, Housing, Retirement, Income, Inflation, Passive, China, Recession, Interest rates, Oil, Buffett, Banks, Dividends, Iphone, Dividend, Housing bubble, Personal finance, Credit, Countrywide.
I am glad the Fed isn't concerned about inflation because I would rather leave interest rates where they are. But it is a fantasy to think that it isn't on the rise, and seriously so. Using the "core rate" (less energy and food) is a fictional concept designed to sooth the financial markets and distract them from the reality of rising inflation -- pure obfuscation. This article from 2005 is the best explanation yet about the reasons for focusing on the "core" rather than the real rate.
Submitted: Jun 29, 2007
Views: 605
Comments: 7
Likes: 56
View Article: http://www.financialsense.com/stormwatch/2005/0624.html
Related Articles:
Is Cheap Money Era Coming to an End? by PhilR - Jun 20, 2007 Summer Vacation for the Fed by PhilR - Jun 23, 2007 Fed Interest Rate Decision Coming on Thursday by JRubinstein - Jun 27, 2007 More Signs Inflation on the Rise by PhilR - Jul 06, 2007 Milking the Wallet by PhilR - Jul 15, 2007 Personal Consumption Numbers Lift Wall Street by PhilR - Jul 31, 2007 Protecting Your Retirement from the Falling Dollar by PhilR - Nov 17, 2007 Bernanke: Housing Correction May Persist; Inflation Still a Concern by Sam Cass - Jul 18, 2007 Fed Cuts Discount Rate by 50 Basis Points to 5.75% by Sam Cass - Aug 17, 2007 Bernanke's Speech from Jackson Hole by LikeItIs - Aug 31, 2007.
Email to someone |
Print Content |
Add to reading list
Comments Received:
Great article. The government clearly is using a more convenient indicator.
Posted: Jun 29, 2007
Against this reality, Bernanke is absurd to be talking about his role as one of inflation fighting, yet to turn blind eye to the real indicators.
Posted: Jun 29, 2007
Right on. I have been looking for an explanation that made sense. Thanks.
Posted: Jun 29, 2007
I think this article is good but I don't think it's as simple as the author makes it out. For example, he discusses core inflation and the fact that it excludes energy. But in many ways it doesn't. The cost of energy shows up in many of the products that we buy. If we counted energy we would be double counting. Say you purchase a rubber tire. You'd be counting the increase in the cost of the rubber tire as well as the cost of the energy needed to produce it. But that increase in energy was already captured in the price. I think economists figured increases in energy would naturally impact the CPI so there was no need to count it seperately.
Posted: Jun 29, 2007
Comment on PhilR's comment. A problem in excluding energy is that people still have to get to work and to the store (to buy products whose price is higher due to energy inflation). Most people go to work and to the store by a gas-powered vehicle. They have to buy gas.
Posted: Jun 29, 2007
@cowmilker89
That's true and it's why it's included in the overall inflation numbers. It's just not in core inflation. I think part of the reason is that energy doesn't respond like other parts of the index. Its price is inelastic. So if you included it and energy spiked up due to a disruption in the Middle East, etc. it would spike the whole CPI. The same thing is true of food. The economists are trying to isolate more discretionary spending in my opinion via the core rate.
Now, how they use those rates and when they refer to them is another matter.
Posted: Jun 29, 2007
It is becoming clear to me know that Bernanke likes his role as purveyor of the bubble and is trying not to jeopardize it. Raising interest rates would exacerbate home price declines and end the private equity buyout spree, and could lead to slowdown in the economy. The Fed will use the indicators they want and in this case that is core inflation.
Posted: Jul 4, 2007
