Greenspan wrong again - Inflation IS accelerating while labor costs do not

inflation can't accelerate until unit labor costs do - WRONG! Labor costs account for two-thirds of finished goods prices, but they don't cause inflation any more than higher oil prices cause inflation - only too much money chasing too few goods and services causes inflation.

Friday's CPI April report had core inflation rising 3 percent year-to-date, but unit labor costs have been falling on a year-over-year basis since the first quarter of 2002. Not that the falling dollar (albeit now moving up a bit in last 12 weeks) has any inflationary consequences. And it could get worse as a CPI factor affected by interest-rate effects - imputed rental value of owner- occupied housing, and which is the largest CPI component - starts moving on up.

But will it be super inflation caused by the FED keeping an expansionary low federal funds rate in the face of a "booming economy" - as the Fed monetizes the increase via purchases of treasury securities so as to keep the funds rate from rising as the cost increases caused by higher oil moves through the economy?

The spread between 10-year nominal and inflation-indexed Treasuries (TIPS) is near a seven-year high at 266 basis points and seems to point to super-inflation expectations by some in the market - are they wrong?

What to do if inflation doesn't stabilize but continues to accelerate - say if we see the FED not raise rates to 1.5% - a 0.5 jump - at the next meeting? Damn if I know!


But then I was not just renominated by Bush for another term as Chairman of the Federal Reserve. In 2000 we learned that Competence should not and is not a barrier to being President per our media - and indeed it is not a barrier to getting a job working for Bush.

Well, well, well…..

IMO, that old fart should be put out to pasture. He has lowered the interest rates – what? - 13 times since DumBya stole office!!!

Inflation IS accelerating while labor costs do not!

He raised the rate during President Clinton’s term. You know, the Republicans never gave President Clinton any credit. They say it was not Bill Clinton who brought prosperity; it was the House Republicans and Alan Greenspin.

Well, guess what? We still have the House Republicans. We still have Alan Greenspin. And where's the economy? Back in the gutter, just like the Reagan/Bush years.

The federal budget deficit was at a historic high of $290 billion, when President Clinton was ELECTED the first time. 10 million Americans were out of work and the nation's economic growth rate under the outgoing Republican administration was the lowest in more than half a century. Clinton introduced his controversial economic plan that raised the income taxes of the richest 1.4 percent of Americans.

It is not the wealthy who are buying. The top 1% spend their money on foreign trips, luxury items, foreign investments or the simply hoard their money. They also know how to cheat on taxes.

Greenspan is willing to let super inflation loose so as to help the Bush election 04 cause.

economy, and that I still think that most, if not all of the inflationary pressure that we are witnessing is due to higher energy prices. If energy prices come back down to earth, as I suspect they will in the next few months, I think all this talk of wild inflation will go away.

Greenie has done everything by the Keynsesian book..injecting "liquidity" during recessions and tightening things during expansions...he may have overdid it a few times, but now it looks like everything is going to hell...people are in debt, and hiking rates now will cause a real estate collapse...He NEEDS to hike rates to prevent inflation, but doing so may lead to stagflation. It's crazy...I'm starting to think we need to get back on a gold standard to keep the morons in washington from devaluing our currency and screwing around with the economy for political reasons. Why not do this??

and monetary fine tuning will not bring them back until the tax situation is cleaned up.

This is not a knock on stimulus concepts - monetary and fiscal - it is just the reality of the impossibility for businesses to set a proper hurdle rate on a new investment when the government deficit is out of control.

Gold is an emotional - not logical - response - and would solve nothing.

Shrub would be the world's savior and revamp monetary policy over the globe.

http://www.democraticunderground.com/discuss/duboard.php?az=show_topic&forum=114&topic_id=5246#top

There is a large core of truth to the concept that overall general inflation is driven more by wages than by prices of raw materials and commodities

Greenspan KNOWS that wages won't rise however so he has adopted this line and made it into a fetish so as to defend his low rate regeim. As we all know inflation as measured by the CPI and other government numbers are skewed to the downside. This is an old story now that predates Bush. Under the Clinton administration these changes in the indexes to downplay inflation were a lynchpin of policy.

And now I must repeat my old rants. The key to understanding much of where we are is to understand that inflation has not been absent these last 10 years. The inflation has been in financial assets and real estate asets. Until you understand that the rise in prices of assets is inflation your going to miss the big picture. Assest inflation has become the be all and end all of our economy and to a huge extent the engine of what we mistakenly call 'economic growth'.


Even most here hope for a continued steady rise in the value of their home. They see it as wealth building. Stocks are no different really. As long as they go up and their 401K rises they think they, and the country are building wealth. Adam Smith is rolling in his grave.

Greenspan has been the father of the asset bubbles worldwide. The worst central banker in history except the first, John Law.

Greenspan and the entire financial world want and NEED the contiued inflation of assets. IF some price inflation seeps thru so he it. He knows that wages won't rise so that the inflation numbers reported will perhaps rise a bit more but will not be freighting. The one thing they cannot allow is the DEFLATION of assets. If stocks and perhaps more importantly residential realestate should drop, read that as deflate, then the world as we know it ends.

http://www.gloomboomdoom.com/marketcoms/indexmarketcoms.htm