That bullshit "dual mandate" gives him far too much leeway in terms of continuing this perpetual ZIRP. With obvious dollar weakness and/or inflationary pressures, he can fall back on weak employment trends and vice-versa.
The problem with your logic is consistency. while it's true that prices will fluctuate, sometimes wildly, due to drought, other natural disaster, or even political problems, it won't vary consistently across many markets due to those causes. If my bananas go up in price, I may have a regional problem, but if my bananas, oats, rice, lamb, and beef all go up at the same time, I'm probably not looking at a regional problem. It is arguable that the reason that the reason those prices are not included in the price index is because of those sorts of regional problem; but with the exception of domestically grown products (corn, wheat, etc) that are in 'everything' that we produce, it isn't a valid exclusion. ("with the exception" because the overall effect of one product will not noticeably impact the final reading of the inflation unless it is a very common product, and a major cultural consumption) Better that they monitored prices of several regional products, and exclude when only one raises, but include if all raise.
Bernanke is no dummy. He knows precisely what he is doing. When he first took the position of the Chairman I believe he was genuinely concerned about the American Public. Now, having been in that position for a number of years, his main concern is to orchestrate the transfer of wealth from the public to the banksters. After all, how did GS generate that $16B in bonus smack dab in the middle of the financial crisis? Simple answer. Taxpayer money.
Exactly. Also, Year-on-Year price increases entirely demolish the rationale to disclude food and energy from the CPI. If the weighted average price of oil is 60$ one year, 80$ the next, and 100$ the next, the CPI ignores them all. It doesn't exist. The BLS also ignore sky-rocketing food prices in grocery stores. They don't exist, either. It's a rigged game, folks. These people running the FED and Treasury are not dumb.
That inflation hinges on wage gains is horseshit. More smoke and mirrors. Any trader/investor worth their salt knows money supply dictates prices. Wage gains are a reaction to the original demand shock. Anticipated devaluation is the primary demand "driver" these days, which, as other posters mentioned, feeds its way into the manufacturing cycle and then onto store shelves. Not everyone is financially illiterate. Smart money doesn't wait for Bernacke to tell them the sky is blue before they shift assets to protect wealth. There is nothing wrong with that. However, the BLS totally re-engineered the CPI so market price indicators become irrelevant, which allows the FED to abrogate it's primary mandate (stable prices) in favor of the more politically expedient second mandate (employment). That shift from market prices to theoretical modeling was really politically motivated by the fuckers in DC to keep themselves perpetually elected. Nobody likes responsible Fed Chairs, like Volker, who do the right thing and take the punch bowl away. Party never ends until the dancehall explodes. Fuck it. "It was a good run", they'll say, as oil hits 300 with blood in the streets.
Oil is the true reserve "currency". The dollar is a convenient proxy when energy prices are relatively stable. They should move in good correlation, since they are tightly linked thanks to two giant oil-sucking economies. But it's the price of oil causing the problem, not what the Fed is or isn't doing to the dollar. IMO, etc.
There is no such thing. That's just basic supply & demand. Inflation is specific to manipulation of demand due to inflated currency supply.