Bernanke Goes All In

These New Times Blog ^ | 1/26/2012 | Bruce Krasting

[quicksilver123]

Well, we got an inflation target from the Fed. Basically, thinking at the Fed has been eliminated. The process has been automated. Bernanke has convinced the Fed board to adopt Core PCE as a determinate of monetary policy. So long as CPCE stays below 2%, Ben is going to have his foot planted on the monetary metal. It’s “full speed ahead” according to the Chairman. He’s pushed things off until 2014 – a very long time from now.

My question: “Why is the Fed using CPCE versus another measure of inflation?” The very good news is that there is answer, and it comes from a very “reliable’ source – The Federal Reserve. A detailed analysis on this topic was conveniently made public just a month ago.

Alan Detmeister produced a doosey of a report. Ya gotta love the title page:

[quicksilver123]

Let's pretend there is no inflation... Insightful article by a market pro on the Fed justifying printing more money. Forget the fact that you KNOW gas, food, housing and everything else has gone up dramatically... The FED knows best. Also, THIS is pretty funny... http://thesenewtimes.com/bernanke_spills-his-guts/

[unkus]

I started receiving the These New Times newsletter via email yesterday and am anxious to see how it pans out.

Welcome to Free Republic, quicksilver123

[aldabra]

Let's pretend there is no inflation... Insightful article by a market pro on the Fed justifying printing more money. Forget the fact that you KNOW gas, food, housing and everything else has gone up dramatically... The FED knows best. Also, THIS is pretty funny... Bernake Spills His Guts

Yup ... Using chained dollars continues the move from measuring the cost of a set standard of living to measuring the cost of a declining standard of living. Chained dollars reflect pure substitution effect. We now historically compare the equivalent of apples to oranges.

You might be interested in shadowstats and their primers

CPI as calculated without 'enhancements':



By understating inflation, the real GDP is over inflated. The GDP using the above CPI:



More gory details available upon request.

[aldabra]

You might be interested in:

http://www.freerepublic.com/focus/f-bloggers/2838586/posts?page=3#3

[unkus]

Thanks, aldabra.

[OB1kNOb]

Reminder to self: Trade more worthless dollars for gold and silver while there’s still time.

[aldabra]

You're welcome.

The blatant corruption of our basic economic statistics ticks me off. Government lackeys use complicated statistical algorithms [formulas] to hide what they are actually doing.

Chained dollars compare the price of goods from one quarter to the next, not to constant dollars.

Here's very simplistic example of calculating inflation using constant dollars vs calculating inflation using chained dollars:

Price of Item X, by Quarter:
Q1 $100.00:
Q1 $101.00:
Q1 $102.00:
Q1 $103.00:

Using constant Q1 dollars inflation = 3% in Q4.
Using chained dollars,       inflation = 1% in Q4.