If you don't like the Pimco, you can go to the second article. The wealth effect has everything to do with your citation of Bernanke. I know you don't understand what he was getting at. Whenever you get things wrong you try and change the content, it's pathetic.
Change the content? The content was about inflation, then Ricter changed it to the stock market. Then the discussion was whether the stock market was driven by QE or not, when it clearly is - regardless of the intent. Then you start talking about valuations and wealth effect and - holy cow - Benghazi. And it's me changing the subject. It's too bad there isn't a medication for your disorder. Why don't we do this...you tell me what it is you want to discuss, specifically. We can discuss it then.
The Benghazi is a the battlecry for those who disregard reality for whatever they want to believe instead. You have not shown anything to indicate that the stock market is driven by QE, correlation is not causation. And for some housecleaning, back to page 5 regarding Shadowstats. It's been debunked by 2 sources: 1) James Hamilton, 2) John Aziz. But in your world, Shadowstats must be right!
Quantitative easing is finally over. Here’s what it accomplished... http://finance.yahoo.com/news/quant...r--here-s-what-it-accomplished-182947394.html "The economy recovered faster after prior recessions when there was no QE at all, which has generated quixotic campaigns to “kill the Fed” and concern on Capitol Hill over whether the Fed is too powerful." The above line in the article says it all - we would be better off without the Fed handing out money to Wall Street banks.
While it is true that correlation is not causation, one need only look at the periods when QE was finished, you'd have to be an idiot (read: you) to not see that QE drives asset price gain. I could do this with commodities, with housing, with bonds, take your pick. In periods where the Fed is printing, assets go up. Hell, that's the whole point of QE, right? Drive inflation! And it would if they could get the money into the economy rather than just the markets. In periods where they stop, asset prices stall or decline from their previous point. It's happened in Japan, it's happened in the UK, and it's happened here. We're not talking the correlation of something like, say, sugar and QE. We're talking almost every market across asset classes. Add to that the Fed governors themselves have said it, admitted it and well, only kooks like yourself still argue against it. It's pretty much as generally accepted now as gravity. But keep on shrieking otherwise. Oh, and throw in a Benghazi battle cry for good measure, whatever good that does. I don't follow or know James Hamilton - is he the same James Hamilton that graduated from UCSD and works energy markets? But Aziz I like, and I follow. I agree with Aziz that the Shadowstats adjustment is applied incorrectly across the timeline, which is why I try not to use the basic chart as backup to anything regarding inflation, and focus rather on the times where CPI was changed to massage the data and create a "better" number. But even Aziz says the following: This is because the methodology in how CPI was changed was done so because of political reasons designed to create a lower (and arguably more stable) CPI indicator. John Williams at Shadowstats wrote an interesting response article to BLS criticism here. The biggest complaint I have with reported CPI is the arbitrary weighting given to the various products, etc in the report. This article sums it up nicely. What's Wrong with the CPI?
Just How Infamous Was that Infamous Open Letter to Bernanke? Published October 28, 2014 "There’s been a lot of comment recently about the infamous 2010 open letter to Ben Bernanke penned by an assorted group of economists, journalists, and financiers warning that the Fed’s quantitative easing policy would cause inflation and currency debasement. "Critics of that letter (e.g., Paul Krugman and Brad Delong) have been having fun with the signatories, ridiculing them for what now seems like a chicken-little forecast of disaster. Those signatories who have responded to inquiries about how they now feel about that letter, notably Cliff Asness and Nial Ferguson, have made two arguments: 1) the letter was just a warning that QE was creating a risk of inflation, and 2) despite the historically low levels of inflation since the letter was written, the risk that inflation could increase as a result of QE still exists. "For the most part, critics of the open letter have focused on the absence of inflation since the Fed adopted QE, the critics characterizing the absence of inflation despite QE as an easily predictable outcome, a straightforward implication of basic macroeconomics, which it was ignorant or foolish of the signatories to have ignored. In particular, the signatories should have known that, once interest rates fall to the zero lower bound, the demand for money becoming highly elastic so that the public willingly holds any amount of money that is created, monetary policy is rendered ineffective. Just as a semantic point, I would observe that the term “liquidity trap” used to describe such a situation is actually a slight misnomer inasmuch as the term was coined to describe a situation posited by Keynes in which the demand for money becomes elastic above the zero lower bound. So the assertion that monetary policy is ineffective at the zero lower bound is actually a weaker claim than the one Keynes made about the liquidity trap. As I have suggested previously, the current zero-lower-bound argument is better described as a Hawtreyan credit deadlock than a Keynesian liquidity trap. "Sorry, but I couldn’t resist the parenthetical history-of-thought digression; let’s get back to that infamous open letter. "Those now heaping scorn on signatories to the open letter are claiming that it was obvious that quantitative easing would not increase inflation. I must confess that I did not think that that was the case; I believed that quantitative easing by the Fed could indeed produce inflation. And that’s why I was in favor of quantitative easing. I was hoping for a repeat of what I have called the short but sweat recovery of 1933, when, in the depths of the Great Depression, almost immediately following the worst financial crisis in American history capped by a one-week bank holiday announced by FDR upon being inaugurated President in March 1933, the US economy, propelled by a 14% rise in wholesale prices in the aftermath of FDR’s suspension of the gold standard and 40% devaluation of the dollar, began the fastest expansion it ever had, industrial production leaping by 70% from April to July, and the Dow Jones average more than doubling. Unfortunately, FDR spoiled it all by getting Congress to pass the monumentally stupid National Industrial Recovery Act, thereby strangling the recovery with mandatory wage increases, cost increases, and regulatory ceilings on output as a way to raise prices. Talk about snatching defeat from the jaws of victory! "Inflation having worked splendidly as a recovery strategy during the Great Depression, I have believed all along that we could quickly recover from the Little Depression if only we would give inflation a chance. In the Great Depression, too, there were those that argued either that monetary policy is ineffective – “you can’t push on a string” — or that it would be calamitous — causing inflation and currency debasement – or, even both. But the undeniable fact is that inflation worked; countries that left the gold standard recovered, because once currencies were detached from gold, prices could rise sufficiently to make production profitable again, thereby stimulating multiplier effects (aka supply-side increases in resource utilization) that fueled further economic expansion. And oh yes, don’t forget providing badly needed relief to debtors, relief that actually served the interests of creditors as well. "So my problem with the open letter to Bernanke is not that the letter failed to recognize the existence of a Keynesian liquidity trap or a Hawtreyan credit deadlock, but that the open letter viewed inflation as the problem when, in my estimation at any rate, inflation is the solution. "Now, it is certainly possible that, as critics of the open letter maintain, monetary policy at the zero lower bound is ineffective. However, there is evidence that QE announcements, at least initially, did raise inflation expectations as reflected in TIPS spreads. And we also know (see my paper) that for a considerable period of time (from 2008 through at least 2012) stock prices were positively correlated with inflation expectations, a correlation that one would not expect to observe under normal circumstances. "So why did the huge increase in the monetary base during the Little Depression not cause significant inflation even though monetary policy during the Great Depression clearly did raise the price level in the US and in the other countries that left the gold standard? Well, perhaps the success of monetary policy in ending the Great Depression could not be repeated under modern conditions when all currencies are already fiat currencies. It may be that, starting from an interwar gold standard inherently biased toward deflation, abandoning the gold standard created, more or less automatically, inflationary expectations that allowed prices to rise rapidly toward levels consistent with a restoration of macroeconomic equilibrium. However, in the current fiat money system in which inflation expectations have become anchored to an inflation target of 2 percent or less, no amount of money creation can budge inflation off its expected path, especially at the zero lower bound, and especially when the Fed is paying higher interest on reserves than yielded by short-term Treasuries. "Under our current inflation-targeting monetary regime, the expectation of low inflation seems to have become self-fulfilling. Without an explicit increase in the inflation target or the price-level target (or the NGDP target), the Fed cannot deliver the inflation that could provide a significant economic stimulus. So the problem, it seems to me, is not that we are stuck in a liquidity trap; the problem is that we are stuck in an inflation-targeting monetary regime." http://uneasymoney.com/2014/10/28/just-how-infamous-was-that-infamous-open-letter-to-bernanke/
Greenspan: Fed can’t exit without turmoil The Fed on Wednesday is expected to announce it will stop buying bonds. Greenspan said that the Fed’s quantitative easing has failed in one of its goals to spur demand. Inflation is “dead in the water” because effective demand is “dead in the water,” he said. http://www.marketwatch.com/story/gr...t-turmoil-2014-10-29?mod=MW_story_latest_news
The cumulative difference between cpi and pce. To the extent cpi is more accurate, gdp growth has been overstated, since the gov'ts gdp growth numbers use pce.
In my opinion the present large bank reserve accounts represent a potential source of future inflation. However this is relatively easy for the Fed to control if they choose to.