Barrons
As our Alan Abelson has related in his weekly Up and Down Wall Street column in print Barron's, the whole cockamamie core inflation concept originated at the Fed during the Nixon era.
According to Morgan Stanley's Stephen Roach, who was toiling as Fed staffer back then, Arthur Burns, then the central bank's imperious chairman who liked to talk tough on inflation, demanded his minions concoct a price measure with energy costs distilled out. It was after the 1973 Yom Kippur war, which led to the OPEC oil embargo and the quadrupling of crude prices, which Burns asserted wasn't the fault of the Fed.
Later, as food prices skyrocketed, Burns commanded that a new measure that also stripped of the cost of chow be conjured by the Fed's statistical wizards. After all, the central bank couldn't be blamed for the effects of the weather that pushed up food costs any more than for the oil cartel's actions.
Thus was born the concept of core inflation, which was aided by a complicit media, which invariably described it as excluding "volatile" food and energy prices. True enough from month to month, but the Fed looks at core PCI on a year-on-year basis. Over that span, short-term blips should even out; if not, they're not blips but trends.
If Bernanke is to target inflation and inflationary expectations, he can't persist in the fiction of the core concept. Only pointy-headed economists will nod in agreement.
Or as another great American philosopher, Abraham Lincoln, said: "You can fool some of the people all of the time, and all of the people some of the time, but you cannot fool all of the people all of the time."
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Boy, my wife sure got ripped off on that kitchen remodel thing.
30k later.
Sometimes ya gotta let 'em run. |
