Hit Tip: El-Elrian
We have always been critical of how the government measures inflation and are flabbergasted by this constant fear and loathing of the talking heads the economy is in or on the brink of deflation,
If Mohamed purchased those bananas at Trader Joe’s — the famous $.19 bananas — it is a classic example of shrinkflation, which is hard to calculate as the “same for less”
is a bit more complicated to measure and easier to hide a price hike than as “more for the same.”
Relative Prices Versus Inflation
Moreover, some, including possibly the next Fed governor, can’t seem to distinguish the difference from a change in relative prices to a rise in the general price index, or what is defined as inflation. We concede the above banana example is a hypothetical but we honestly believe true inflation, that is actual prices paid for the same amount of goods or services, unadjusted for “quality” or no hedonic tricks, is higher and more ubiquitous than reported. Yes, some gym memberships are cheaper but rent for the average Jane and Joe consumer continues to rise at a fairly rapid clip.
Rampell Learns Moore
Watch how Washington Post reporter Catherine Rampell owns Stephen Moore, who was recently nominated for the Fed board, 2 minutes into the video. Moore, wrongly or falsely claims the economy is in deflation and appears to say the Fed rate hike in December is causing soybean prices to fall? Are you freaking kidding me?
Rampell is spot on that soybean, and many other farm prices including wheat, are falling and weak because of Trump’s trade wars. The Fed driving down soybeans? What a joke!
Nasty Business — Politics Ain’t Beanbag
We don’t hold back on our view that Moore is unqualified for the Fed, is a complete economic ignoramus, or in Irish, and total Idjit. Nothing personal to Moore and all is directed at his professional qualifications but it must be argued in the context of the bloodsport of a political cage fight. A very nasty place to do business, indeed.
The reason for our nastiness is that the stakes are so high.
Dollar At Stake
We are not in Kansas anymore, Toto, and Fed appointments are so much more than just appointing the local dog catcher.
We believe the reserve status of the U.S. dollar is at stake and the credibility of U.S. policy is slowly being chipped away, which will determine the difference between the next QE driving asset prices higher or turning the U.S. into Venezuela.