Johns Hopkins University Professor Larry Ball, Princeton Professor Paul Krugman, U.C. Berkeley Professor Brad DeLong, University of Oregon Professor Tim Duy and Texas State University Professor David Beckworth are among those recently arguing that Fed Chairman Ben Bernanke is neglecting his own earlier academic insights into what the central bank should be doing in a situation such as the United States presently finds itself. Here’s what I think they’re overlooking.
Category Archives: inflation
Links for 2012-03-14
Quick links to a few items I found interesting.
Factors in the recent oil price increases
Crude oil prices surged last spring following disruptions in oil production from Libya, and had been drifting down during the summer and fall. But since the beginning of October, the price of West Texas Intermediate and Brent crude oil have both risen by over 30%, putting them back up near where they had been last spring. What’s changed in the world since the beginning of October?
Inflation expectations and the Fed
The Fed has begun implementing its new communication strategy. Here’s what the message seems to be.
FOMC statement
The Federal Reserve still would like to do more, but not right now.
The CPI, and Some Key Components
A perennial topic of discussion is the deficiencies of the CPI in measuring the things that are important to “real people”. I actually believe that there is a point to some of these critiques. In particular, we know the CPI is “plutocratic” in that the weights associated with the CPI bundle are consistent with the expenditure shares of a household somewhere in the 4th income quintile. [1] [2] However, I think that other critiques — namely that food, health, and transportation, are missed — are misguided.
Fidei defensor
Or, some people continue to defend the view that rapid inflation is just around the corner
An Econbrowser reader writes, in defense of Governor Perry’s assertion that the Fed is debasing the currency: “The CPI is not a valid indicator of ‘debasement.'” I think this comment provides a wonderful example of the Alice in Wonderland world in which some people reside — if the data do not cooperate, redefine the terms!
Waiting for the Fed to act
Economic conditions are deteriorating. Here’s how and when the Fed might intervene.
Chained CPI
Recent reports ([WSJ RTE] [Bloomberg] [The Hill]) indicate that under consideration as one approach to curtailing entitlement spending growth is to resort to Chained CPI, as opposed to the current official CPI series, which is based on a quasi-Laspeyres formula.