Chief Economist: Real Inflation Is Now In The Double Digits And Pain Is Coming

chief economist real inflation is now in the double digits and pain is coming

Sumary of Chief Economist: Real Inflation Is Now In The Double Digits And Pain Is Coming:

  • In the 1970s, Federal Reserve Chair Arthur Burns denied that monetary policy played a role in the inflation cycle..
  • Mr. Burns argued that higher inflation was due to idiosyncratic factors, such as food shortages and the OPEC oil embargo..
  • The Fed Chair demanded that the Fed staff strip out the volatile food and energy components to prove his point, thereby creating what is now called the core inflation index..
  • That proved to be a policy blunder as it allowed Mr. Burns to maintain an easy money policy that fueled the most significant and most extended inflation cycle in the post-war period..
  • In recent decades, regional branches of the Federal Reserve have created new price conventions (e.g., median cpi, trimmed cpi)..
  • It took the Fed Chairs of Volcker and Greenspan an entire decade, lifting official rates far above inflation to break the 1970s inflation, and in 1994 it took Greenspan a full twelve months to suppress a potential cyclical jump in inflation…

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