Saturday, January 15, 2011

The Fed: "We Wanted Inflation, But We Didn't Make It Happen"

Yes, well, that's what the St Louis Fed President actually said, more or less. Here PowerLine delves into the question.

[B]asically Bullard touts QE2 as building up inflation expectations, driving up treasury yields (thus averting a potential deflationary cycle), which was the goal of the Fed QE2 initiative. Furthermore, Bullard contends that global demand and supply factors are behind the record high prices across almost all commodities, which he believes is unrelated to QE2. . . .

Since the Fed hinted at QE2, commodity price inflation has surged at a record pace during the past six months (Fig. 4) The manifestation of inflation is a combination of many factors including but not limited to expectations, which drives behavior, as well as supply and demand factors.

So, for Bullard to "take credit" for driving up inflation expectations, but ignore its inflationary effect on commodity prices is illogical as well as self-contradictory. --D. Chu, quoted in PowerLine

Umnnhhh, yah.

And if you're watching copper, the Old Farts' Barometer, you know exactly what 'inflation' really looks like.

Or you could go shopping at a grocery store, or buy gasoline.

My frequent-commenter Strupp will argue that 'grocey prices haven't risen all that much.'

OK. But producer prices HAVE risen--a lot--and as Ticker mentioned, that only means that your grocer/butcher/candlestick maker is taking it in the chops on the pre-tax profit line.

Great!!! Either the retailer/supplier goes banko, OR you pay a lot more.

Meantime, Timmy's working on perfecting his TurboTax technique for 2010 income--we hope.

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