tag:blogger.com,1999:blog-11719208.post115033147135445735..comments2023-11-05T04:36:14.223-08:00Comments on The Mess That Greenspan Made: How Not to Fight "Inflation"Timhttp://www.blogger.com/profile/16530974968126497397noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-11719208.post-1150475769721339902006-06-16T09:36:00.000-07:002006-06-16T09:36:00.000-07:00Fed officials now seem worried that we may be seei...Fed officials now seem worried that we may be seeing the start of another round of self-sustaining inflation. But is that a realistic fear? Only if you think we can have a wage-price spiral without, you know, the wages part.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-1150439241852162072006-06-15T23:27:00.000-07:002006-06-15T23:27:00.000-07:00Here's the definition of "fraud":1. A deception de...Here's the definition of "fraud":<BR/><BR/>1. A deception deliberately practiced in order to secure unfair or unlawful gain. <BR/>2. A piece of trickery; a trick.<BR/><BR/>http://dictionary.reference.com/browse/fraud<BR/><BR/><BR/>So we have a central bank who states that there is no inflation and that they are actively fighting inflation.<BR/><BR/>But they are simultaneously expanding the money supply for their own gain. The more they lend, the more interest they collect.<BR/><BR/>deliberate deception... secure an unfair gain... trickery through CPI distortions...<BR/><BR/>YES, that is the EXACT definition of fraud. I don't think you could come up with a more clear-cut case of fraud than the Fed.<BR/><BR/><BR/>So our central bank the one controlling key parts of our economy... just proven to be fraudulent.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-1150438235521854182006-06-15T23:10:00.000-07:002006-06-15T23:10:00.000-07:00Yes it's a ruse and they know it. However it's mo...Yes it's a ruse and they know it. However it's more than saving the dollar.<BR/><BR/>Why does everyone assume the Fed's stated goals are the same as their real goals?<BR/><BR/>If the Fed is the source of all inflation, then how can they claim to "fight inflation"? To "fight inflation" they'd simply stop creating money. Therefore, it's obvious the only thing they are really fighting is the *perception* of inflation.<BR/><BR/>But isn't that deception with the intent to profit? Print money and inflate, but look over here... nothing to see folks.<BR/><BR/>Isn't that fraud?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-1150404137996480792006-06-15T13:42:00.000-07:002006-06-15T13:42:00.000-07:00Great post, Tim. Its a ruse and Bernanke knows it...Great post, Tim. Its a ruse and Bernanke knows it. The goal here is to save the dollar. Incidentally doing this would have effects <I>similar</I> to fighting inflation--for example, keeping imports from becoming excessively expensive (yes, pushed far enough, the Chinese <I>will</I> float against us).Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-1150402069055184062006-06-15T13:07:00.000-07:002006-06-15T13:07:00.000-07:00Some of you are missing the point of this story, w...Some of you are missing the point of this story, which is to demonstrate how ridiculous monetary policy has become as a result of attempting to manage only certain prices and substituting one thing for another in an era of wild asset price inflation <BR/><BR/>In this case, Tim correctly states that all else equal, if interest rates were lowered, core CPI would likely go down because rental costs would go down due to decreased demand for rental housing as more people would be buying homes again. <BR/><BR/>Back in the 70s and 80s when we didn't import so many inexpensive foreign goods, rising wages would result in rising consumer prices, which then resulted in rising wages, and the cycle fed on itself. Today the system is completely different as a result of how the CPI is constructed, how productivity has changed, and how inexpensive imported goods put downward price pressure on both consumer price and wages.<BR/><BR/>The result is what the Europeans view as a fundamentally flawed approach to monetary policy where too much emphasis is placed on narrow price indexes, and not enough emphasis is placed on monetary aggregrates and other factors.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-1150400515543601442006-06-15T12:41:00.000-07:002006-06-15T12:41:00.000-07:00The same argument could be made for oil: why rais...The same argument could be made for oil: why raise interest rates to lower inflation caused by rising oil prices, when those high prices are already acting to curtail consumption?<BR/><BR/>I'll tell you why: the Fed must manage NOT inflation itself, but EXPECTATIONS of inflation. Further, they cannot risk letting inflation get a start.<BR/><BR/>If they lower interest rates to make housing affordable, not only will the housing bubble continue off the charts once more, but inflation will keep rising as consumption increases. These 14 interest rate increases still have NOT dampened consumer spending. You cannot lower rates to save homeowners or to make the CPI look lower, because it won't work. If it were that easy, they would have done it already. The Fed has briliant economists, hundreds of them, mulling this all day long. <BR/><BR/>Believe me, if lowering interest rates would bail out housing and the economy while reducing inflation, IT WOULD HAVE BEEN DONE. Because it is painless. But they haven't done it BECAUSE IT CANNOT WORK.powaysellerhttps://www.blogger.com/profile/02003676065147831309noreply@blogger.comtag:blogger.com,1999:blog-11719208.post-1150393630254336452006-06-15T10:47:00.000-07:002006-06-15T10:47:00.000-07:00Well what's the problem?Rate's reduced, more peopl...Well what's the problem?<BR/><BR/>Rate's reduced, more people buy houses, inflation falls, rates reduced again - all good.<BR/><BR/>Rate's raised, more people rent, inflation rises, rates raised again - all bad now?<BR/>As chechetti states, at [http://people.brandeis.edu/~cecchett/pdf/inf_current.htm]<BR/><BR/>"I firmly believe that some measure of the cost of owner-occupied housing belongs in the price index used for monetary policy purposes. We should not just get rid of it. Furthermore, looking at these data, there are two choices: Either the OER distorts the CPI, or it doesn't. If it does, then along with claiming that measured inflation is currently too high, you have to accept that measured inflation from 2001 to 2004 was too low. That is, there was never a deflation scare. Instead, policy was much too loose following the end of the 2001 recession. That's what I think, but I doubt that Chairman Bernanke does."Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-1150392010628239982006-06-15T10:20:00.000-07:002006-06-15T10:20:00.000-07:00Let's not define inflation and let the market dete...Let's not define inflation and let the market determine the interest rate.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-1150390744202748882006-06-15T09:59:00.000-07:002006-06-15T09:59:00.000-07:00They should just define core inflation as two perc...They should just define core inflation as two percent and be done with it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-1150390116028000002006-06-15T09:48:00.000-07:002006-06-15T09:48:00.000-07:00Even better, we could quit trying to guess which c...Even better, we could quit trying to guess which components are going to be most "stable" and just define "core inflation" as the average increase in components that didn't go up each month.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-1150388626695600682006-06-15T09:23:00.000-07:002006-06-15T09:23:00.000-07:00So, am I to interpret the last paragraph as sarcas...So, am I to interpret the last paragraph as sarcasm about lowering rates? I sure hope so...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-1150387396018547372006-06-15T09:03:00.000-07:002006-06-15T09:03:00.000-07:00None other than Dean Baker, co-director of CEPR ag...None other than Dean Baker, co-director of CEPR agrees with you:<BR/><BR/>http://beatthepress.blogspot.com/2006/06/is-bernanke-promoting-inflation.html<BR/><BR/>but of course his analysis is not dripping with sarcasm.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-11719208.post-1150383423262063922006-06-15T07:57:00.000-07:002006-06-15T07:57:00.000-07:00I always wondered about the effect of raising rate...I always wondered about the effect of raising rates has on prices as well, due to the higher interest rates. Also peoples payments on loans and credit cards.<BR/><BR/>That said, IMHO, I believe this rate hike regimine is the medicine for the economy to wring out the excesses of the housing bubble. It is time for some reality to return.Metroplexualhttps://www.blogger.com/profile/14292504988481464302noreply@blogger.com