tag:blogger.com,1999:blog-1110014885778996459.post6763549674800344629..comments2024-03-29T00:15:52.716-07:00Comments on Idiosyncratic Whisk: June 2017 CPIKevin Erdmannhttp://www.blogger.com/profile/07431566729667544886noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-1110014885778996459.post-38367515333510756982017-07-26T10:55:23.287-07:002017-07-26T10:55:23.287-07:00The Fed, as an inflation targeter, was legitimatel...The Fed, as an inflation targeter, was legitimately thrown off by high inflation in 2008. In terms of their own targets, in this way, you are correct that in 2008 there was reason to tighten. In 2011, that was probably from QE2. I think the QEs were more effective than they are generally given credit for. But, when they were stopped, inflation would fall again. Monetary policy had an asymmetric effect during this time, because we were engaged in a passive destruction of working class balance sheets by closing down credit access in those markets and pushing their home prices down 15% or more as the owner-occupier low tier market was destroyed. When the QEs were on, they countered that problem. When they were off, the lack of credit growth led to disinflation. Under QE, we probably weren't too tight.<br /><br />All that being said, if the Fed is targeting 2% inflation, then inflation between 2-3% is one reason for potential targeting, but in the midst of a national credit catastrophe, one might still expect some accommodation.<br />There are several layers of criticism here, and I might not be clear enough about them when I talk about them:<br />1) the target mechanism is mis-specified (rent inflation is non cash)<br />2) the target mechanism is wrong (NGDP over inflation targeting)<br />3) the Fed has missed their own target<br />4) the Fed would like to provide stability, but the populace wouldn't stand for it<br />5) Some members of the FOMC share the public's demand for instability<br /><br />Throughout a lot of the crisis, while I think the Fed is part of the problem, it really is generally problem number 4, with some #5 thrown in. Even today, Bernanke, Geithner, etc. have to apologize for having stabilized markets.Kevin Erdmannhttps://www.blogger.com/profile/07431566729667544886noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-35551269203318501302017-07-26T09:25:16.581-07:002017-07-26T09:25:16.581-07:00If I understand you correctly because core - shelt...If I understand you correctly because core - shelter is falling now the Fed should be more inclined to loosen. What about the opposite in 2010 when core - shelter spiked to 3%, and was at 10-15 year highs from 2008-2010. How do we select our indicators?Baconbaconhttps://www.blogger.com/profile/13511082564082971086noreply@blogger.comtag:blogger.com,1999:blog-1110014885778996459.post-53345919313154138902017-07-21T05:47:20.707-07:002017-07-21T05:47:20.707-07:00Great charts. You can see that shelter inflation C...Great charts. You can see that shelter inflation CPI peaking in 2002 and 2007…and now? <br /><br />As you say, fat chance the Fed is going to reverse course even on interest rates, and as for more QE or helicopter drops, you might as well hope for manna from heaven. <br /><br />For a long time I have wondered what the Fed would do if the economy softened and interest rates and inflation were still near zero. The Japan-ish scenario, in other words. <br /><br />Regrettably, maybe soon I will find out. <br /><br />Interesting question: Are large trade deficits and tight property zoning, alongside a banking system heavily exposed to real estate, an inherently unstable situation? <br />Benjamin Colehttps://www.blogger.com/profile/14001038338873263877noreply@blogger.com