I have discussed this in the past, but my curiosity remains. Here is the latest "conundrum", the FED can't figure out why inflation is decelerating.
- Fed, split by inflation, should forge on with rate hikes: Mester
- Fed Starts to Wonder If Cornerstone Inflation Model Still Works
Federal Reserve officials are looking under the hood of their most basic inflation models and starting to ask if something is wrong.
Minutes from the July 25-26 Federal Open Market Committee meeting showed a revealing debate over why the economy isn’t producing more inflation in a time of easy financial conditions, tight labor markets and solid economic growth.
The central bank has missed its 2 percent price goal for most of the past five years. Still, a majority of FOMC participants favor further rate increases. The July minutes showedan intensifying debate over whether that is the right policy response.
“These minutes to me were troubling,” said Ward McCarthy, chief financial economist at Jefferies LLC in New York. “They don’t have their confidence in their policy decisions; and they don’t have confidence that they can provide the right kind of guidance.”
Well, there is really nothing mysterious about any of this. Even a retarded buffoon can figure this one out. Let alone a Harvard Economist.
When you flood the financial system with unlimited credit at zero interest rates everything is performing at its peak. For the time being and artificially, of course. However, when everyone is in debt up to their eyeballs, as is the case today, velocity of money slows down and inflation disappears. That is prior to turning into an outright deflationary collapse or debt liquidation.
The second point is, the inflation they are so blatantly unable to find is on clear display in the stock market. How else can you explain Shiller's P/E Ratio at an all time high. Higher than 1929 and arguably 2000 if we adjust for tech earnings distortions. That's where all of that "FREE MONEY" went. Straight to speculation.
My view remains, they are either cretins for not understanding this or they do. In which case they are knowingly running the biggest Ponzi scheme in the history of humanity.
Once thing is certain, scary times ahead.
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