Over at Bloomberg Mark Waterhouse wonders, as I have, where the inflation that the Federal Reserve governors see might be hiding:
When Federal Reserve officials meet this week to discuss how much more stimulus the U.S. economy needs, they will have to parse various arguments about the threat of inflation. Those who want the Fed to raise interest rates, for example, sometimes assert that whatever the headline numbers show, price increases are already hitting some people hard.
The data don’t present much reason for concern.
The balance of the post concentrates on where prices have, indeed, risen and it’s the usual suspects: healthcare and education. His bottom line is that inflation isn’t biting much if at all.
There’s one group that inflation is in fact hitting: the rich. For example, the Forbes Index for Living Extremely Well increased more than 5% last year. The cost of investment, something that isn’t included in the CPI, has gone up as well. Meanwhile, the incomes of the rich went up by double digits.
If the Fed decides to raise interest rates, my tentative conclusion is that the Fed governors are hanging out with wrong people and that their wages are too high. I’d suggest a 50% cut as a start. And put serious controls over lunches, dinners, travel, and other gratuities they’re able to accept.
Inflation in many items has been artificially reduced by imputing new features into price – lowering it of course. We can’t fancy new app our way to living affordably.
The cost of housing, a major component of expenditure, is running well ahead of the index with almost record rent rates and low interest rate fueled price increases. We know how that ends.
I have no idea what their food price components say, another big component, but just go to the grocery store and then ask yourself about stable prices. It doesn’t pass the snicker test.
The biggest costs to investment are the “opportunity cost” of low interest rates and the 4% Obamacare tax. Not to mention the basic rate increase. That hits a decidedly not rich Aunt Gertrude like anyone else.
As for entertainment goodies, I have no idea what the goal there is but spite. I haven’t received such stuff in many years, and further, you can’t help Joe Lunchpale by attempting to hurt me, nor offset Fed policy. Go ahead, do it, Idont care. But it’s irrelevant to Fed policy.
We could try something really novel. Have the Fed stop buying debt willy-nilly and see where rates start to settle out naturally. After all, for every real estate whore, er, broker who sold one fewer McMansion, or for every faux stock market investment genius, Aunt “The Saver” Gertrude could buy a whole host of things if her money wasn’t earning .25%.