The government has a knack for coming up with “new” things when the “old” things don’t want to work anymore.
For example… Quantitative Easing.
Prior to 2009, that phrase (and the concept behind it) did not exist in any economic vocabulary. Back in the good old days of the early 21st century, if the Fed wanted to tweak monetary policy, it simply adjusted its Fed Funds target rate via open market operations.
Huge crash in the stock market? Dial down the funds rate and add some liquidity. Banking sector freezing up because of a bunch of bad loans? Take funds down a couple more points.
The problem is, when you get to zero, there’s nowhere else to go. So when the “old” thing wasn’t working anymore, they needed a “new” thing. And the concept of “quantitative easing” was born. (You have to wonder how much they pay the people in the Fed’s marketing communications department.)
Today that phrase is so common it’s simply called QE.
What Else Isn’t Working These Days?
Whatever they’re doing to get inflation under control.
Last week the headline CPI print came out up 8.3% year over year — substantially above estimates.
Undoubtedly the amount of “QE” that has been in the works the past couple years has certainly been an aggravating factor in the prices we’re seeing today. But if you’ve been reading this letter for any length of time, you know I’ve been harping on the fact that this is a supply-chain based inflation cycle.
And hiking rates — the Fed’s “old” way of dealing with high prices, simply isn’t going to work. (Especially with the government handing out hundreds of billions of dollars in green energy stimulus.)
Time for a “New” Thing?
While digging through inflation numbers last week, I came across a version of the CPI report I’d never seen or heard of before.
The July print , which appears to be the most recent, showed inflation rose a mere 6%. Way better than 8.3%!
So in the interest of curiosity, I thought I’d share it with you. It’s called…
CPI “Core Core”
What is the “core core” inflation number? According to TradingEcnomics.com, “core core” inflation excludes food and energy… and shelter and used cars and trucks.
The Bureau of Labor Statistics publishes a line item for what they call their “core” inflation number. They have a line item for it in their data table as “All items less food and energy.” No line item, however, for the “core core.”
So based on this, I’m wondering two things…
First, are we about to be introduced to another “new” thing? I’m going to keep an eye on it.
And second, if we are, why don’t they just exclude apparel and medical care?
They’d have inflation licked in no time!
Make the trend your friend,
Bob Byrne
Editor, Streetlight Daily