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Bernanke thinks inflation is tame: "The rate of pass-through from commodity price increases to...

Bernanke thinks inflation is tame: "The rate of pass-through from commodity price increases to broad indexes of U.S. consumer prices has been quite low" because those factors are “relatively small” weights in his measurements. But with prices for gasoline and food ripping higher, the world view of those not in the ivory tower seems very different from his.
Comments (40)
  • wyostocks
    , contributor
    Comments (7714) | Send Message
     
    "in his measurements."
    Exactly.........If he covers his eyes it doesn't exist.......Hide your head under the covers and the boogie man will go away......
    1 Mar 2011, 06:16 PM Reply Like
  • Ken Hasner
    , contributor
    Comments (427) | Send Message
     
    I think more accurately what he said was that temporary price spikes in commodities and energy tend not to raise the inflation rate to any great degree.

     

    He is still afraid of deflation and I think he is right. The problem is that his monetary stimulus is not benefiting employment and only stoking the fires of inflation while preventing the structural reforms needed for a true economic recovery. The transmission mechanism for capital (taxpayer to FED to Banks to economy...back to taxpayer in the form of jobs, salary gains, etc) is broken at the banking step.
    1 Mar 2011, 06:23 PM Reply Like
  • Stoploss
    , contributor
    Comments (1727) | Send Message
     
    Im sure you're well aware that food and energy make up about 16 % of the index weighting, putting them at the bottom of totem pole, so to speak. You will recall that China's inflation rate jumped last month due to high food and energy costs. China's food and energy made up 33% of their index. What did they do??
    Why, they changed the weighting of the index, and dropped the food and energy weighting by half, and voila'! No more inflation.

     

    Therefore, there will never be any inflation shown in food and energy, because if it did, we would see a re-weighting before it became a problem. Those are "his measurements".

     

    Ben can CTFR at any time.
    1 Mar 2011, 06:58 PM Reply Like
  • JohnBinTN
    , contributor
    Comments (3629) | Send Message
     
    I do the same with cavities. I pretend they aren't there until they start to hurt. Then it hurts and costs twice as much to get fixed.
    1 Mar 2011, 07:05 PM Reply Like
  • inthemoney
    , contributor
    Comments (981) | Send Message
     
    > I think more accurately what he said was that temporary price spikes in commodities and energy tend not to raise the inflation rate to any great degree.

     

    Well, it is not really true judging by recent exerience. 2 years ago during the last oil spike airlines raised fees, which were never rolled back. Airlines even becme profitable last 2 years. Alos, food prices were raised and never rolled bck either.
    1 Mar 2011, 07:27 PM Reply Like
  • surfgeezer
    , contributor
    Comments (6843) | Send Message
     
    In fact he also talked about CPI. He is not unaware and quite specifically said it will effect recovery if continued. Remember the debt and required low rates are far more affected by Congress than the Fed's reaction to those politician created problems as he also pointed out.
    2 Mar 2011, 12:51 AM Reply Like
  • TheGainMaker
    , contributor
    Comments (12) | Send Message
     
    If higher commodity prices are not making their way to the final product as "through prices" as Mr. Bernanke says, then they will be absorbed by the companies that utilize those inputs in their products. This of course means lower margins and lower earnings which will lead to lower stock prices.
    The real play here is to get into the stocks that provide for those commodities at valuations that are currently undervalued because estimates have not been revised up yet.
    1 Mar 2011, 06:32 PM Reply Like
  • The Last Boomer
    , contributor
    Comments (889) | Send Message
     
    The main determinants of inflation are past inflation and unemployment rate. Both are at levels that suggest relatively low inflation. Today on Bloomberg radio somebody was saying that the bond markets are betting on 2.2% inflation over the next 4-5 years. This is the collective wisdom of the crowds telling us inflation expectations are low.
    1 Mar 2011, 07:16 PM Reply Like
  • inthemoney
    , contributor
    Comments (981) | Send Message
     
    What does collective wisdom think of FED buying something like 30% of all treasuries? Wouldn't it think that the bond market is distorted because of this?
    1 Mar 2011, 07:37 PM Reply Like
  • surfgeezer
    , contributor
    Comments (6843) | Send Message
     
    Only slightly, it is an open market with a new bidder (Fed), that only increases the supply of bidders for a nominal effect on price.
    2 Mar 2011, 01:00 AM Reply Like
  • DavyJ
    , contributor
    Comments (415) | Send Message
     
    I fail to see how a bit of price deflation would hurt. Which categories of the CPI would you defer based solely on expectations of lower prices in the future and therefore cause deflation to spiral out of control? Numbers are percentages of CPI.

     

    41.96 Housing
    16.69 Transportation
    14.80 Food
    6.51 Medical
    6.44 Recreation
    6.43 Education
    3.70 Apparel
    3.48 Other Goods and Services

     

    On the other hand, the interest on the federal deficit would be painful I suppose.
    1 Mar 2011, 07:29 PM Reply Like
  • inthemoney
    , contributor
    Comments (981) | Send Message
     
    What I don't understand is - with housing being 40% of CPI how did they miss the housing bubble, why didn't CPI show 10% inflation the during housing boom? It is hard to put ny credibility into CPI after that.
    1 Mar 2011, 07:38 PM Reply Like
  • Hirendu Vaishnav
    , contributor
    Comments (54) | Send Message
     
    LOL -- I guess it is housing which is what he is worried about. If housing drops further - too big to fail banks are bankrupt (if not already).

     

    From day 1, this was about saving five/six banks. Imagine this; Bernanke has brought the world as we know it to the point of implosion just to save five banks. And it is going to get much worse. How many dead people are worth saving jobs/bonuses for bankers?? Reasonable answer would be ZERO. And we are already at thousands and getting worse.
    1 Mar 2011, 07:51 PM Reply Like
  • Poor Texan
    , contributor
    Comments (3529) | Send Message
     
    It's necessary to keep the defined inflation rate low so the government can avoid COLA's to seniors. It's a way to control the cost of social security benefits.
    1 Mar 2011, 09:54 PM Reply Like
  • surfgeezer
    , contributor
    Comments (6843) | Send Message
     
    Also don't forget if they don't transfer the debt to a later date other countries can and do buy to affect relative currency rates. This tilts the GDP towards consumerism and away from manufacturing and exports or more precisely-jobs. This, to me is the most important. They don't control how much debt we have, a fact the politician's attacking their policies seldom mention.
    2 Mar 2011, 01:11 AM Reply Like
  • Hendershott
    , contributor
    Comments (1514) | Send Message
     
    So, if oil prices are up because of Libya et. al. and food prices are up because of extreme weather, what is the Fed supposed to do about it? Raise interest rates? Which will do what about the Middle East and the weather?
    1 Mar 2011, 07:30 PM Reply Like
  • rooftop
    , contributor
    Comments (140) | Send Message
     
    Bernanke has exported inflation and that jacked all commodities from food to fuel. Listen, the world has dealt with inclement weather for many many years but nobody has dealt with a big bank puppet like big Ben.
    1 Mar 2011, 08:48 PM Reply Like
  • surfgeezer
    , contributor
    Comments (6843) | Send Message
     
    No country has been "forced" to Peg their currency to ours. If they let their currency rise their is no inflation for the dollar pegged commodities.
    2 Mar 2011, 01:18 AM Reply Like
  • rooftop
    , contributor
    Comments (140) | Send Message
     
    Bernanke is a textbook idiot. See what I did there?
    1 Mar 2011, 07:31 PM Reply Like
  • amscott8
    , contributor
    Comments (31) | Send Message
     
    I am pretty sure The Bernanks boyfriend must drive the car and do the shopping. This view is truly idiotic and strikes of the French Bourgeousie's (probably spelled wrong) treatment of the Proletariats. He needs to get off his high horse and join the country he is destroying.
    1 Mar 2011, 07:43 PM Reply Like
  • surfgeezer
    , contributor
    Comments (6843) | Send Message
     
    or you and rooftop could learn half of what he has forgotten about how money works.
    2 Mar 2011, 01:21 AM Reply Like
  • rooftop
    , contributor
    Comments (140) | Send Message
     
    LOL, you're talking about the same guy who stated that the subprime crisis was contained.

     

    You're putting a lot of faith and a lot of stock in Bernanke's academic credentials. He is highly intelligent but I'm concerned with what he's actually doing, not how much theory he understands.

     

    Furthermore, I don't know if posting this link will work but I invite you to read this article about a doctor here in Canada:

     

    www.cbc.ca/news/canada...

     

    If the link doesn't work, please google "Dr. Charles Smith". I see what Bernanke's actions are doing and I don't care where he got his PhD.
    2 Mar 2011, 09:36 AM Reply Like
  • surfgeezer
    , contributor
    Comments (6843) | Send Message
     
    You're equating a doc who was not trained and misled his superiors and got people wrongly convicted with Bernanke? LOL
    Bernanke was not the only one fooled by the opaqueness of the derivatives and the horrible ratings from the agencies. I defend him because he is doing what he is supposed to, the politicians are the ones adding on the debt and it would be a nightmare to have the special interest driven politics we have now doing monetary policy. Yes, I understand and support QE. Rolling the due dates til later is about the best you can do when the politicians are out of control with the debt and their other mandate is employment which QE is helping.
    3 Mar 2011, 02:31 AM Reply Like
  • realornot
    , contributor
    Comments (1281) | Send Message
     
    "Bernanke thinks inflation is tame" Maybe in his neighborhood. Well maybe his wife does all the shopping. He is late on rescuing market at the beginning and now he is over-rescuing by drowning us with cheap cash and inflated gas price.
    1 Mar 2011, 07:49 PM Reply Like
  • surfgeezer
    , contributor
    Comments (6843) | Send Message
     
    That is the danger of reading headlines instead of listening to the whole deal. The headlines are spin.
    2 Mar 2011, 01:24 AM Reply Like
  • tigersam
    , contributor
    Comments (1711) | Send Message
     
    Last 10 years there is very little change in the price of milk in the United States. There is almost no inflation in US compare to other countries. In other countries like India, China etc. the price of milk went 1000 times in last 10 years. We need inflation so we can make some money and living starndard goes up.
    1 Mar 2011, 07:54 PM Reply Like
  • JohnBinTN
    , contributor
    Comments (3629) | Send Message
     
    Milk is $2.68/gallon here. It's a travesty. All the babies will die.
    1 Mar 2011, 08:12 PM Reply Like
  • Bio Insights
    , contributor
    Comments (962) | Send Message
     
    Yes. The single mom working at walmart on a fixed minimum wage is truly going to "live the life" if food gets more expensive and driving to work kills more of her budget.
    1 Mar 2011, 09:04 PM Reply Like
  • realornot
    , contributor
    Comments (1281) | Send Message
     
    Is that the only thing you shop/drink/eat during the past 10 years? I say you are a very simple person. Wish I can do that?
    Here are some of the facts that will take away your incorrect assumptions on price of milk went 1000 x in China & India.
    For China past 10 years (not 1000X):
    www.englishfirst.com/t...
    For India past 10 years (not 1000X):
    indiatoday.intoday.in/...
    For US past 10 years:
    www.usda.gov/nass/PUBS...
    price of milk went up in US and not staying at a constant price!
    You have over inflated milk prices for China & India. At the same time, you have under-inflated milk prices for US.
    Please talk with facts!
    1 Mar 2011, 11:52 PM Reply Like
  • Uber Vandal
    , contributor
    Comments (296) | Send Message
     
    "We need inflation so we can make some money and living standard goes up."

     

    I strongly urge you to follow the advice from this clip from the movie Tropic Thunder.

     

    www.youtube.com/watch?...
    2 Mar 2011, 03:14 AM Reply Like
  • Harry Tuttle
    , contributor
    Comments (2221) | Send Message
     
    He excludes whatever he doesn't like. Housing is indeed dead. Many consumer goods are "adjusted" in the calculation. Seems to me like a nice way to control inflation...ignore it.
    1 Mar 2011, 08:03 PM Reply Like
  • surfgeezer
    , contributor
    Comments (6843) | Send Message
     
    CPI has housing as the largest component, people whine about groceries going up, but no one actually sees the house going down. Most people are net negative even with the groceries up if they own a house. Read the comments and the lack of understanding of that is rampant, yet it is still true.
    3 Mar 2011, 02:36 AM Reply Like
  • HiSpeed
    , contributor
    Comments (1066) | Send Message
     
    Ben and the Ministry of Propaganda are merely talking their book. Anyone who shops for food/gas is well aware of what inflation really is where it matters most.
    1 Mar 2011, 08:38 PM Reply Like
  • Bouchart
    , contributor
    Comments (763) | Send Message
     
    If you tell Bernanke that prices are rising considerably in one sector he'll tell you that it doesn't count. It's the type of reasoning you'd expect from a child.
    1 Mar 2011, 08:41 PM Reply Like
  • realornot
    , contributor
    Comments (1281) | Send Message
     
    try this to Bernanke..... are we there yet....are we there yet "inflation that is" Oh...Sush....!
    2 Mar 2011, 12:54 AM Reply Like
  • surfgeezer
    , contributor
    Comments (6843) | Send Message
     
    He does not say it does not count, it just does not add up if you count housing and they do. Groceries are from the terrible weather instability (lets not call it global warming because the oil companies don't like that) and uprising in the main oil region-neither FED controlled. He also said it would if it continued, a fact not in the headline.
    3 Mar 2011, 02:41 AM Reply Like
  • Bio Insights
    , contributor
    Comments (962) | Send Message
     
    "Ben, gasoline is 5$ a gallon! Inflation is out of control!"
    "Well I guess more Americans are cycling to work nowadays - I guess transportation is more like... 8ish"
    1 Mar 2011, 09:10 PM Reply Like
  • youngman442002
    , contributor
    Comments (5131) | Send Message
     
    Milk is subsidized by the US government...so the price is not an open market price...

     

    Secondly...I can´t believe the difference from an Educated politician..and a dumb street educated person like me.....I can clearly see the inflation..I can clearly say there is inflation...I can show examples...copper...co... don´t....to me that means they are lying for some reason..and they are.....and the question is WHY?????? that is what scares me.....are we not all Americans..
    2 Mar 2011, 06:43 AM Reply Like
  • wyostocks
    , contributor
    Comments (7714) | Send Message
     
    You have your eyes open without a hidden agenda hence you see clearly.
    Politicians and the likes of Ben, admit to seeing what they do through the prism of their hidden agenda.
    Most will not admit to seeing what is in their interest not to.
    2 Mar 2011, 07:50 AM Reply Like
  • surfgeezer
    , contributor
    Comments (6843) | Send Message
     
    He understands and is correct. The problem is the people of America have no clue, so they are buying the half truths of the gold bugs or any other thing that sounds reasonable on first brush. Dig and learn. I've posted above housing is in the inflation and it is still going down. Even a slight % change in a house is huge compared to groceries or gas. Copper and ALL other necessary commodities are sold on the open market and currencies have ALWAYS changed based on the underlying economic strength of the economy behind them. The people inside the country may not notice unless they buy something from a country that has gained economic strength faster than their own. We now import a great deal from countries that are growing faster and are competing with those countries for the commodities now that the world is back increasing demand. Switching to a Gold tied currency will not help those forces. Our economy is mature and we spend to much GDP protecting our competitors for free, while not paying for it. Those are the basic reasons.
    The FED controls none of those, yet the people who do-politicians- hope to side track the public by pointing at the FED instead of the special interest driven policies that are making the gov ineffective and killing the competitiveness of US.
    3 Mar 2011, 03:02 AM Reply Like
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