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Officials at the Federal Reserve and elsewhere long ago learned how to achieve their goals without actually doing anything.

 If traders simply believe the Fed will intervene should interest rates go above or below a certain level, rates probably won’t breach that level, or even get close to it. No one wants to make the Fed pull its trigger. 

This is why central banks are so obsessed with “credibility.” They don’t want to actually use their monetary firepower,

Central banks once sought to stop inflation, not achieve it. Now generating it is the goal.  

The concept of a 2% (or more!) average inflation level, running even hotter at times, has been discussed in economic circles for many years. 

Core PCE [Personal Consumption Expenditures] understates to the greatest degree of any inflation metric the cost of healthcare and housing

PCE lets them pretend inflation is low and achieve their unwritten policy objective of keeping the stock market bubbling along.

But unintended or not, the consequences are still there. Is the average man on the street unjustified in thinking that “the elites,” whatever the hell that means, are not looking out for his best interest?

John Mauldin 4 September 2020

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