A Benjamin Cole post
In the Market Monetarist community, there is a lot of bemoaning “the media.”
Well, meet Alex Rosenberg of CNBC.
While other reporters weigh in on inflation and the U.S. Federal Reserve Board’s ponderous decision-making, Rosenberg (correctly) points out the markets say inflation is about dead.
“The Federal Reserve now looks set to raise rates in December, partially based on expectation that inflation is set to finally rise to its 2 percent target. There’s only one potential problem. There’s actually a way that markets can see where investors think inflation will go. And they do not exactly see eye to eye with America’s central bank.”
“Over the next five years, annual inflation is expected to run at less than 1.3 percent. Even over the next ten, investors are looking for no more than 1.6 percent per year.”
Hot dang! Of course, Rosenberg is referring to the TIPS market, and deducing inflation expectations from inflation-protected U.S. Treasuries compared to plain-vanilla Treasury IOUs.
It gets better:
“So while the Fed continues to bang the drum on its 2 percent inflation target, and is now apparently trying to prevent inflation from rising above that in the future, it is striking to note just how quickly the bond market’s expectations of inflation have been decreasing,” writes Rosenberg.
The CNBC’er does such a good job, I will stand aside and just quote some more:
“Over the past year, almost no inflation has been seen, with prices actually falling year-over-year during some months. And while this is partially a reflection of falling oil prices, inflation has generally been declining for the past quarter of a century.”
Now that is some great reporting, econo-punditry. Where have they been hiding this guy? Well, he is “new,” as they say. His bio says he has a BA from Brown, minted 2011. He did something for NBC Universal before. CNBC calls him a “producer,” but he obviously one of the nation’s better econo-pundits already.
On The Other Hand…
From the elevated insights of Rosenberg, we descend to the befouled chambers of Ralph Nader, who a couple generations ago made his mark as a consumer activist. Nader on Oct. 30 (he should have waited a day) wrote a public letter haranguing Fed Chair Janet Yellen for keeping interest rates low, and so harming ordinary savers.
“We want to know why the Federal Reserve, funded and heavily run by the banks, is keeping interest rates so low that we receive virtually no income for our hard-earned savings while the Fed lets the big banks borrow money for virtually no interest.”
This is a blog, not a book, so I run of pixels to list all the reasons why Nader is making an ass out of himself. We could start with Rosenberg, who correctly points out inflation has been dying for decades. So interest rates come down too—duh.
Or that savers are also employees, employers and investors, and tighter money could wreck the economy, as it did in 2008. Or that higher short-term interest rates could lower long-term interest rates (by lowering growth and inflation expectations), so investors in bonds—that is, savers—would get lower yields. Or that even if yields on long-term bonds went up, then savers who bought bonds would suffer capital losses (bond values would go down).
The helmet-haired Yellen soiled herself by responding to Nader, but the Federal Reserve enjoys any discussion, however poorly premised, about why rates should go up, so she seized the opportunity.
How do we get CNBC’er Rosenberg to run the Fed?