Thoughts on Gov. Inflation Equation.

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2 years ago

Government statisticians now employ an arbitrary and non-market price for owner's rent, removing actual housing prices from the calculation

Adjusting reported inflation for those exclusions or changes would result in double-digit gains in both headline and core CPI for the past twelve months.

In the 1970s, Federal Reserve Chair Arthur Burns denied that monetary policy played a role in the inflation cycle. Mr. Burns argued that higher inflation was due to idiosyncratic factors, such as food shortages and the OPEC oil embargo.

Once inflation cycles start, they gain momentum on their own.

Yet, if past inflation cycles are a guide to the future, investors will soon become the Fed's loudest critics.

Today's inflation cycle creates many problems for the current generation of policymakers.

First, how can you use justify changing monetary policy for an inflation problem you say doesn't exist?

Second, if policymakers decide they need to raise real interest rates, what price measure do they use as a benchmark?

Third, how does the Fed drive real interest rates higher when they own a third of the Treasury market.

Prepare now, buy as much food as possible.

I'm buying cases of canned food and planting fruit trees.

Prepare or suffer much much worse.

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