Inflation, Stanley Fischer And Dybbuks

A Benjamin Cole post

Some Fed watchers took heart when Stanley Fischer, smart guy and former Israeli central bank chieftain, took the No. 2 slot at the U.S. Federal Reserve in 2014.  After all, Fischer had guided Israel through the 2008 global tight-money debacle, by using his central bank to counteract the worst effects of the worldwide slowdown. Fischer printed shekels, and it worked.

But the Fed has dybbuks (spirits), which have taken over Fischer. Some call it the Fedborg.

“Given the apparent stability of inflation expectations, there is good reason to believe that inflation will move higher as the forces holding down inflation dissipate further,” Fischer just yesterday told the ongoing Fed confab in Jackson Hole.

Really? What stability is that?

The “Stability”

BC on Fischer_1

Another chart (both swiped from Tim Duy, btw):

BC on Fischer_2

There in fact seems to be a stable trend on the two charts—downwards, that is.

Of course, I can remember when the markets anticipated double-digit inflation, and homebuyers took out 18% mortgages in the United States. So what makes inflation expectations stable?

If the Fed would raise rates now, when would it not raise rates?

In 2008?

A Strange Time

We live in strange times, when a hysterical squeamish prissiness about microscopic rates of inflation passes for monetary policy.

Remember the much-loved “Inflation Fighter” President Ronald Reagan? Or the towering iron-willed price-stablizer and central banker Paul Volcker?

In Reagan’s last full year in office, 1988, the CPI was rising at 4.4%. Inflation then accelerated to 4.6% the next year.

President Obama and Fed Chief Janet Yellen (and Fischer) make Reagan and Volcker look about as tight with money as wastrel winos headed to the corner liquor store.

I will leave it to pathological sociologists to explain the current phobia about inflation (as dubiously measured, no less). It is certainly not about macroeconomics.

I just wish we could get back to 1980s and 1990s, when the U.S. had robust growth and moderate inflation. Seems like a long, long time ago now.

2 thoughts on “Inflation, Stanley Fischer And Dybbuks

  1. Fischer gets away with such nonsense by appending the story of long a variable lags. So, the taper began in January 2014, QE 3 ended completely almost a year ago. Here we are a year and half after the taper began with what a simplistic plugging in of data points to MV=PY would suggest as a shortfall in M. When is it that central bankers like Fischer decide that they may have made a mistake and the lag is showing up as something they didn’t expect?

    This bobbing and weaving with the suggestion that there’s some serious inflation waiting to jump out from under every rock and bush with an unprovable argument like lags is all nothing but weasel verbiage for not doing one’s job. It’s completely shameful.

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