In today’s Chart of The Day we show what the Federal Reserve currently uses as its definition of “inflation” – something academic wonks call “Core PCE”, or the US Personal Consumption Expenditure Core Price Index.
Other than this chart going straight down for the foreseeable future (until at least Q3), here’s what this time-series means to me:
- Instead of using real-world inflation, Bernanke deferred to a made-up calculation that fit his policy narrative
- In 2011, the US Dollar hit its lowest-level since 1978 - that’s what perpetuated the highs in this chart
- But since, at $1900 Gold, “there was no inflation” (per the Fed); it said it was just about right at 2%
I can guarantee you that everyone Paul Krugman influences in the Yale and Princeton econ departments completely disagrees with the context I just provided you. So that means I’m probably onto something…