Friday, January 15, 2010

December Core CPI: up .1%

The BLS tells us there is still no sign of any moderate inflation much less hyperinflation. The WSJ reports that the Fed is unlikely to change anything at it's January meeting.

So, we've got a terrible employment situation and no sign of inflation. And the Fed thinks its best to do nothing. Makes sense to me.

UPDATE: In this post, I was being facetious. Longtime readers of this blog know that, going back six or seven months now, I've been arguing that the Fed should be doing more than it is. And every new data release has been saying the same thing -- that the job market is still much, much weaker than we want it and inflation does not appear to be a problem. It's really gotten farcical...


  1. "So, we've got a terrible employment situation and no sign of inflation. And the Fed thinks its best to do nothing. Makes sense to me."

    1) what does unemployment have to do with the fed funds rate? if you or anyone else could provide a simple chart showing the correlation between the two, i'd appreciate it.

    2) seeing that JPM announced that $3 billion quarter today, it's clear they don't need to borrow from the fed at 0%, and loan it to me via credit card @ 19.99%, the requisite & quite annoying fees. i think it's ok to raise rates a lil'. let 'em earn their bonuses for once.

    3) re: inflation. is the fed taking credit for a 0.1% CPI, as a function of adroit monetary policy? did they take credit for the ~3% core CPI circa 2006-2007 too? has anyone at the fed done a historical case study of inflation rates with the central bank, vs. w/o? it amazes me that people, esp. economists, believe they have control over anything.

    i hate being snarky, b/c i really like your blog, but the quotation from you above strikes me as a non-sequitur for many, many reasons, e.g. the rhetorical questions that followed.

  2. I think "Thorstein," Joseph Stiglitz, and Paul Krugman think the Fed should be expanding quanitative easing (buying more bonds and commercial paper) as opposed to their current path of contracting it. They still think we are in a "liquidity trap" where the interest rate at "0%" is still 4 to 5 hundred basis points to high. But perhaps they agree with Greg Mankiw and Larry Kudlow who apparently thinks that U.S. labor costs will really start shaping up when unemployment gets up to 15% after they start raising rates and shrinking the fed balance sheet (as well as paying interest to the poor banks to keep that money in their reserve deposits at the Fed) in order to boost the dollar and reassure the owners of capital that they are serious about inflation. The elite of the U.S. right now has no fear of the masses.

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