PeakTrader.com

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PeakTrader said...

The Fed has been trying to create inflation, at the general price level, because when prices rise, additional profits are made, which ramps-up production and attracts more producers, to employ idle resources, e.g. labor and capital.

We've seen this with higher oil prices from Peak Oil.

Of course, the Administration and Congress have their own ways to create inflation, e.g. through excessive regulation of selected industries, which creates scarcity.

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VangelV said...

The Federal Reserve Bank of Cleveland reported today that its latest estimate of 10-year expected inflation is 1.34 percent. In other words, the public currently expects the inflation rate to be less than 2 percent on average over the next decade.

Let us put this in perspective.

"Federal Reserve Chairman Ben Bernanke and other top officials of the U.S. central bank missed the nation's oncoming housing crash, believing as late as December 2006 that the market was stabilizing, according to transcripts of policy meetings released on Thursday."

"The discussion by the members of the FOMC, the Fed board members in Washington and 12 regional bank presidents, gave no indication that any of them foresaw the devastating impact that the collapse of the housing bubble would have. The country fell into a deep recession and severe financial crisis that led to the loss of more than 8 million jobs."

Given the Fed's inability to see the damage that it was causing before why should we believe what the Fed thinks today? And why aren't we quoting the beliefs and analysis from the people who actually got right what the Fed got wrong? What do Murphy, Faber, Schiff, Rogers, Sprott, etc., think will happen with inflation as opposed to the Cleveland Fed?

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PeakTrader said...

VangelV, yes, "let us put this in perspective."

The economy is not static. What was said by the Fed in Dec '06 would not necessarily apply in Dec '07.

The U.S. was on a path to a mild recession, until Lehman failed in Sep '08 (thanks to the easing cycle that began in late '07 and the Bush tax cut in early '08, which gave the Fed time to catch-up to achieve a "soft-landing").

Monetary policy didn't create the "damage" (except monetary policy was restrictive in late '07, after the Fed Funds Rate was raised from 1% in 2004 to 5 1/4% in 2006, along with contractionary fiscal policy, which caused the downturn initially).

The damage was caused by a lack of regulation, or an easing of lending standards, which should've been tightened instead, by politicians like Barney Frank, Chris Dodd, and others.

And, the doom and gloomers, like Murphy, Faber, Schiff, Rogers, Sprott, etc., all they prove is a broken clock is right twice a day.

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Htowner said...

Really? The figures are manipulated just like the unemployment numbers. Come on Mark. Take an average family-ask them if inflation is as low as the Gov says. Sad

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PeakTrader said...

Htowner, my monthly income has increased roughly 50% over the past few years, and yet my monthly payments, e.g. for housing, food, clothing, insurance, auto, etc., are roughly the same, except I pay more for gasoline.

Of course, prices go up and down.

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geoih said...

Quote from PeakTrader: "Monetary policy didn't create the "damage" ..." And: :The damage was caused by a lack of regulation, ..."

Monetary policy has created all the damage for the last 100 years. You're honestly going to state that we don't have enough regulation? We live in the most regulated society in history.

At some point the continued support for failed measures is simply farcical. It's like watching medieval physicians bleeding their patients and not understanding why they aren't getting better.

Your premises are flawed. They are the opposite of correct. How many more years of failure will it take for you to accept that it isn't working?

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PeakTrader said...

Geoih, people like you believe economic boom/bust cycles (not to be confused with asset boom/bust cycles) are good, and all regulations are bad.

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Ron H. said...

Peak: "Htowner, my monthly income has increased roughly 50% over the past few years, and yet my monthly payments, e.g. for housing, food, clothing, insurance, auto, etc., are roughly the same, except I pay more for gasoline."

Well, there's your own personal example of inflation higher than projections.

If that income is in the form of salary, do you think you produce 50% more than you did a few years ago?

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PeakTrader said...

Ron, I know I perform my work better and faster.

It seems, over the past two or three years, many workers got only cost of living raises, i.e. less than 3% a year, because of the economy.

Nominal growth (real growth and inflation) has been low.

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The U.S. economy is in uncharted waters.

Peak oil, depression, national debt greater than GDP (with $1 trillion a year budget deficits), money multiplier below 1 (MULT fred), excess reserves (EXCRESNS fred) off the chart, and an economic illiterate leading the most important economic recovery in history with statements like this:

"You know we can’t just drill our way to lower gas prices."

Rising gas prices will slow or stall the recovery.

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