US FED: Kohn - Fed Will Do What's Necessary, Eyes H2 Pickup Tuesday, February 26, 2008 12:25:00 PM Boston, February 26. Fed vice chairman Don Kohn says monetary policy works with a lag and that a second half recovery is likely, though adverse risks abound. He concludes, "we will see a return to stronger growth, lower unemployment, lower inflation and improved flows in financial markets, but it probably will take a little while." Kohn says (quoting Bernanke) that the Fed will apply monetary policy as required to address both growth and inflation risks. He says inflation expectations remain well anchored and that current elevated readings will moderate. Kohn also credits the weaker dollar for stronger trade position. The dollar index is of 45 pips or 0.6% today, as strong PPI confirmed nearby inflation threats that will worsen in the wake of cheaper funds rate. After making these comments to the assembled press, Kohn was heard off-stage saying "Ben, pass me that pipe."
First off, you need to look at how the Government "measures" inflation. There is also a "quality" component that you are most likely unaware of. This is the reason why automotive prices in the CPI have been declining over the past decade, because of getting more bang for your buck with such features as ABS, GPS, and other technical marvels. On another note, when looking at Health costs the CPI does not look at medical insurance premiums . . . They look at certain surgical procedures over time. Again, you need to look at how the Government defines inflation at the retail end-user level. It may not seem realistic to you or me ( where gas prices have increased 35% in the past year here in California ), but this is the DEFINITION that FED governors are most likely referring to.
Oh, I understand all about quality and the definition of inflation the governors use. Doesn't change the fact that the way they look at inflation is antiquated, irrelevant in today's world, and completely ass-backwards as far as the consumer - the general public - is concerned. And lest we forget, the general public is what the government is supposed to serve.
I don't really believe the inflation numbers as well, but Kohn seems to be doing a much better job than Bernanke or Paulson. He is coming across as very realistic. Higher energy, food, bad housing market, etc etc. Frankly, I think he is saying that he forcasts inflation to slow because he is setting the stage for more rate cuts. Read between the lines.
That will never happen, they did not let the cycle take effect. Had they let the market take care of this we would have had a recession like we need to correct commodity prices. Now if the economy improves commodity prices will surge high and higher. You can't have it both ways. The fed is out of control, they only care about wallstreet and the money center banks. This is a train wreck in the makings.
LOL! I know why he is saying it. That doesn't mean what he says is correct or the best approach at monetary policy!
You bet it's a train wreck waiting to happen. Just position yourself accordingly to protect your capital and standard of living.
Then we agree, but we can only beat this dead horse for so long. The FED is either wrong on inflation or knowingly complicit. They will do what they want to do and years from now we will be reading in textbooks how the FED helped steer the US economy into financial catastrophe. End of story, no happy ending.