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Distinguishing Home ‐​Grown Inflation from Global Inflation
Alan ReynoldsEach country imagines inflation to be anational problem to be entirely blamed on national fiscal authorities or on each nation ' s central bank. Yet March CPI inflation averaged 8.8% for all 38 countries in theOECD, and 7.8% for the 27 EU countries.Economists at the Federal Reserve Bank of San Francisco, in theFRBSF Economic Letter, ask a narrower question: "Why is U.S. Inflation Higher Than in Other Countries?"  They first begin by acknowledging that there have been some uniquely huge global events driving world pricesdownin 2020 (COVID-19 lockdowns causing long-term loss of productive capacity) and other po...
Source: Cato-at-liberty - May 9, 2022 Category: American Health Authors: Alan Reynolds Source Type: blogs

Another Defective IMF study on Inequality and Redistribution
Alan Reynolds “IMF Warns on the Dangers of Inequality,” screams the headline of a story by Ian Talley in the Wall Street Journal. The IMF – which Talley dubs “the world’s top economic institution”– is said to be “warning that rising income inequality is weighing on global economic growth and fueling political instability.”  This has been a familiar chorus from the White House/IMF songbook since late 2011, when President Obama’s Special Assistant David Lipton became Deputy Managing Director of the IMF.  It echoes a December 2012 New York Times piece, “Income Inequality May Take Toll on G...
Source: Cato-at-liberty - March 15, 2014 Category: Health Medicine and Bioethics Commentators Authors: Alan Reynolds Source Type: blogs

Real Earnings Should Stop Falling If Energy Prices Stop Rising
Alan ReynoldsIn an interesting newPeterson Institute blog, Jason Furman and Willie Powell write, “Real wages and compensation increased dramatically in the first six months of the pandemic, as prices fell while wages and compensation continued to grow. Since then, however, price growth has been more rapid than wage and compensation growth, and so real wages and compensation have been falling. ”The facts are clear, yet they scream out for clarification. First, evennominalaverage hourly earnings “increased dramatically in the first six months of the pandemic (March‐​August 2020)” while the economy collapsed under...
Source: Cato-at-liberty - January 31, 2022 Category: American Health Authors: Alan Reynolds Source Type: blogs

The Strategic Petroleum Reserve Was Never Used Strategically
Alan ReynoldsPresident Biden plans to tap the Strategic Petroleum Reserve (SPR) for a  million barrels a day for six months, describing this as “awartime bridge to increase oil supply until production ramps up later this year. ”This is only the second time that the SPR has been used for the purpose Congress intended in 1975 – to counteract temporary spikes in the global price of oil due to cartel extortion or foreign wars. The first time was during the Gulf War, on January 16, 1991, when President George H.W. Bush announced the SPR would immediately begin selling up to 2.5 million barrels a day. On the following d...
Source: Cato-at-liberty - April 1, 2022 Category: American Health Authors: Alan Reynolds Source Type: blogs

GDP Inflation Includes Food, Energy and Export Prices
Alan ReynoldsAWall Street Journal editorial, “Rumors of Stagflation, ” describes accelerating inflation in the first quarter GDP report: “The GDP decline … coincided with an accelerating rise in prices. The GDP price index rose at an 8% annual rate on top of 7.1% in the previous quarter. The Fed’s preferred inflation measure, personal consumption expenditures , rose 7%, when its target is 2%.”The Fed ’s preferred inflation measure is really the “core” personal consumption index which excludes some but not all food and energy prices. The Core PCE was up 5.2% in the first quarter, nearly the same as 5% in t...
Source: Cato-at-liberty - April 29, 2022 Category: American Health Authors: Alan Reynolds Source Type: blogs

The Fed ’s Unplanned Soft Landing of 2018–19
Alan ReynoldsFederal Reserve officials spentmonths talking ‐​up their visions of a linear upward path for the overnight federal funds rate on bank reserves, but with few clues about when the increase might stop or why.But markets do not wait for the Fed to act. The policy ‐​making Federal Open Market Committee (FOMC) had done nothing until now except to raise the fed funds rate a quarter point in March. Yet they nonetheless managed to double mortgage interest rates and crash the value of bonds and stocks in retirement accounts by simply talking increasingly bold ly about what FOMC members “project” might happ...
Source: Cato-at-liberty - May 4, 2022 Category: American Health Authors: Alan Reynolds Source Type: blogs

U.S. Gasoline Prices Depend on Global Oil Markets — Not “Independence”
Alan ReynoldsI still have a  1979 bookmark that says, “INFLATION IS A PAIN IN THE GAS.”Funny but wrong. U.S. gasoline prices follow gyrations in world oil markets, which depend on global (not domestic) supply and demand.What actually happened in 1978 –80, an important German study from Bruegel reminds us, was the Iranian revolution and the Iran ‐​Iraq War: “The 1978 Iranian revolution decreased global supply by 4 percent and led to a price increase of 57 percent. The 1980 Iran‐​Iraq war decreased global supply by 4 percent and led to a price increase of 45 percent.”What happened to world oil market...
Source: Cato-at-liberty - May 10, 2022 Category: American Health Authors: Alan Reynolds Source Type: blogs

Escalating Oil Prices and Fed Funds Rates Preceded Every Recession Since 1957
Alan ReynoldsIn 1997, Former Federal Reserve ChairmanBen Bernanke, while still an academic, wrote a famous historical study for the Brookings Institution: “Systematic Monetary Policy and the Effects of Oil Price Shocks” with Mark Gertler and Mark Watson.It began by documenting that “essentially all the U.S. recessions of the past thirty years have been preceded by both oil price increases and a tightening of monetary policy. ” So here we are again tightening monetary policy at a time of unaffordable oil price increases.In fact, Fed Chairman Jerome Powell argues the Fed must be more aggressive about r...
Source: Cato-at-liberty - June 10, 2022 Category: American Health Authors: Alan Reynolds Source Type: blogs

Should “Core Inflation” Include Jet Fuel?
Alan ReynoldsUnsurprisingly, airline fares generally rise and fall with jet fuel prices which, in turn, mirror global crude oil prices. Yet airline fares are part of the “core” Consumer Price Index (CPI), which supposedly excludes food and energy.Futures prices for crude oil and grain have soared since last December when Russia began to amass troops around Ukraine. That rise in global commodity prices, in turn, has greatly increased costs of producing and distributing everything from plastics to fertilizer and meat. And, of course, so ‐​called “core” transportation services, such as airfares.In the CPI, airline...
Source: Cato-at-liberty - July 13, 2022 Category: American Health Authors: Alan Reynolds Source Type: blogs

Fed Chair Powell ’s Story about Service Price Inflation Is Untrue
Alan ReynoldsInThe Wall Street Journal’s “Year ‐​End Review&  Outlook,” Sam Goldfarb deftly summarized a recent shift in the Federal Reserve’s focus away from PCE inflation —which slowed to a 2.4% rate from July to November— to a diverse hodgepodge of services prices.“In recent remarks,Fed Chairman Jerome Powell has emphasized that, even in recent months, there has been only a  modest slowdown in price increases for core services outside of housing. That is an area of the economy seen as most sensitive to labor costs, which have shown few signs of decelerating.”Although Mr. Powell ’s latest s...
Source: Cato-at-liberty - January 3, 2023 Category: American Health Authors: Alan Reynolds Source Type: blogs

The Macro View – Health, Economics, and Politics and the Big Picture. What I Am Watching Here And Abroad.
June 09, 2022 Edition-----The Russian war on Ukraine is now well over 100 days old. The destruction and deaths are just awful and the world is being seriously re-shaped. Where this ends is unknowable but unlikely to be good.In the US we are seeing almost daily mass shootings and no-one seems to know what to do. Just pathetic.In the UK the hangover is slowly lifting after the 4 day royal celebration.In OZ we are having an energy crisis which we hope we will find solutions for soon!-----Major Issues.------https://www.theaustralian.com.au/business/economics/australias-labor-government-faces-a-whole-new-economic-ball-game/news...
Source: Australian Health Information Technology - June 9, 2022 Category: Information Technology Authors: Dr David G More MB PhD Source Type: blogs

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