Be Patient, the Fed Will Screw You Eventually (With Media Praise All The Way)

Policymakers at the Fed are growing increasingly concerned about lagging inflation rates. Mainstream media and most academia pundits are on board preaching the benefits of what in reality is theft.

Dallas Fed president Robert Kaplan says the Low 10-Year Yield is an 'Ominous' Sign.

The Fed has raised rates twice this year, and is widely expected to do so again in December. But even as the short-term interest rate targeted by the Fed has climbed, the yield on the benchmark 10-year Treasury has fallen, a reversal of what usually happens and a development that Kaplan said he sees as “a little ominous.”“I view that as a comment on future economic growth,” Kaplan said at the Stanford Institute for Economic Policy Research. “And what I don’t want to see us do is raise rates so fast that we get an inverted yield curve because history has shown an inverted yield curve has tended to be a precursor to a recession.”

Patience Required

Many policymakers are worried that the slow pick-up in price increases may be due to long-term trends, not just short-term factors. They urged that "some patience" guide the Fed as it considers plans to raise interest rates.

Inflation Benefits

The BBC is right on board with the Fed preaching the benefits of inflation.

Most central banks favour an inflation target that is in the region of 2% to 2.5%. The Bank of England's target of 2% under the CPI measure is fairly typical. Some economists argue there should be a higher target in times of recession, such as 3%. This can promote higher growth, by keeping interest rates lower for longer.But whatever the precise level, most do agree that a little dose of inflation is absolutely essential."The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like the plague," said the Austrian philosopher and economist Ludwig von Mises."Inflation is a policy."

Inflation is Theft

Inflation is certainly policy, but it's also theft. And quoting Ludwig von Mises as a proponent of inflation is beyond the pale. Let's look at Mises View of Inflation, in context.

Danger Charlatans at Work

The Fed wants to hit the "natural" rate of inflation but they do not even know what it is.Ironically, there is no such thing. But even if there was a natural rate, it would be impossible to measure because the Fed does not count asset bubbles or home prices in its measure of inflation.

Economic Challenge to Keynesians

Of all the widely believed but patently false economic beliefs is the absurd notion that falling consumer prices are bad for the economy and something must be done about them.

I have commented on this many times and have been vindicated not only by sound economic theory but also by actual historical examples.

There is no answer because history and logic both show that concerns over consumer price deflation are seriously misplaced.

The BIS did a study and found routine deflation was not any problem at all.

Deflation may actually boost output. Lower prices increase real incomes and wealth. And they may also make export goods more competitive,” stated the BIS study.

It’s asset bubble deflation that is damaging.

Note that central banks’ seriously misguided attempts to fight routine consumer price deflation, they create destructive asset bubbles that eventually collapse. When those bubble burst, and they will, it will trigger debt deflation, which is what central banks ought to fear.

For a discussion of the BIS study, please see Historical Perspective on CPI Deflations: How Damaging are They?

Meanwhile economically illiterate writers bemoan deflation, as do most economists and central banks. The final irony in this ridiculous mix is central bank policies stimulate massive wealth inequality fueled by soaring stock prices.

Inflation is in the eyes of the beholder. The Fed and economic writers in general are clueless when it comes to measuring it.

Please note I have moved my website to The Maven. For details, please see Welcome to the New MishTalk .

Mike “Mish” Shedlock

Economists believe that American workers still get COLAs. So inflation would mean increasing paychecks, lower debt to income ratios and more spending. They didn't get the memo that when labor unions go away, COLAs go away with them.

I often argue with myself that these jackasses can't be that stupid, and there must have some ulterior motive behind this, but then they open their mouth, I remove all doubt. PS: Can we have a post button?

Good idea on a post button

It's laughably ironic that the FOMC posts it's latest inflation and market manipulation wisdom using technology platforms that have experienced 30 percent price erosion annually for decades now.

I would say, a POST button, and an EDIT your comment button would be most useful. Removing
embarrassing typos.

@Maximus_Minimus good points, as a heads up, if you hover over any comment, you can see a little menu on the right with three dots, in that menu there are actions you can do like EDIT. A POST button is also a good idea, I think there are some design conversations going on about this right now.


Prefer the old layout & functionality.


The Fed (and all the other central banks) are in the business of supporting their debt funded governments. Of course they want low interest rates and inflation; it keeps the governments in business spending money they don't have.

Mainstream economists believe that lower retail prices will lead to lower profits by corporations, leading to layoffs, which then creates lower demand for goods. This results in lower prices, and the cycle repeats. Were it not for Bernanke's policies of lower rates and QE, we would have likely entered a deflationary spiral and a severe recession or depression. Instead, stocks are hitting all time highs and unemployment is at cyclical lows. The predictions for recession have not yet panned out, and in fact, we are approaching the longest period in history without a recession. Until the bubble actually pops, the results of the last 7 years suggest that central bank policies have revived an economy on the verge of a deflationary depression and helped most investors grow their wealth substantially.

“if there was a natural rate, it would be impossible to measure because the Fed does not count asset bubbles or home prices in its measure of Challenge to Keynesians “Prove Rising Prices Provide an Overall Economic Benefit” has gone unanswered...trigger debt deflation, which is what central banks ought to fear.”

1) Factor in Obamacare 20+% health cost increases, which are 25% of family expenditures, and you get 5% price inflation right there. Faulty models yield faulty data, purposely because 5% price inflation would mean 5% increase in Federal gov benefit payments like Social Security, pensions.

2) Keynesian challenge goes unanswered, because the whole point has nothing to do with economics, which is secondary to consolidating power and control in the unelected bureaucracy that rules the USA.

3) Debt deflation will give the Fed and central banks more power, as every new problem means larger staffs and more delegation of power to the unelected bureaucracy by the Crony Congress whose campaigns are financed by those with financial power.

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