Slack Is Back; Powell’s The Voice Of Reason Here?

If there is one thing Economists understand very well, it’s mathematics. This is practically all they do, and all that means much to their discipline. If there’s one thing Economists don’t seem either competent with or interested in, it’s the economy. The math is supposed to match the other’s reality, yet rarely does.

There are times, however, when simple calculation is sufficient and (figuratively) on the money (literally, that is the whole other story).

Such was the case around 2011 and 2012. You might remember that period for exorbitant gasoline and food prices triggering FRBNY President Bill Dudley’s iPad debacle, or how restaurants began charging extra for extra napkins, of all things, as paper prices blew upward at a seemingly insane pace.

Both those things as well as other similar outcomes had led to the first of several inflation manias.

The inflation indices were howling, scorching hot according to nearly every Federal Reserve critic who had been “warning” that so much “money printing” could only come home to roost by robbing consumers of purchasing power. Ben Bernanke’s central bank policies – by then two massive QE’s – were sucking the remaining life out of the dollar and, they claimed, hoisting its carcass onto the economy in the form of grossly higher prices.

Bernanke and indeed many Economists took a more rational, appropriately mathematical approach. Understanding how these things work, certainly how they are measured, monetary officials here and elsewhere were suddenly resolute. Prices had gone up, sure, commodities most of all, though when compared to very low prices such as those produced during any deflationary period like the Great “Recession” the rebound from it would naturally come out sizable.

Base effects.

In early 2011, Chairman Bernanke, the guy whose reputation was riding on QE producing inflation, instead told everyone to take a step back and chill.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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