PCE vs CPI
- PCE stands for Personal Consumption Expenditures. Those numbers come from the Bureau of Economic Analysis (BEA)
- CPI stands for Consumer Price Index. Those numbers come from the Bureau of Labor Statistics (BLS)
The key difference is the PCE includes prices paid on behalf of consumers (e.g. Medicare and Medicaid), whereas the CPI only contains prices directly paid by consumers.
The PCE tends to overweight medical expenses while the CPI tends to overweight rent.
The Fed’s preferred measure of inflation is PCE.
CPI and PCE Both Seriously Flawed
Neither measure directly incorporates home prices. Economists explain this away by stating homes are a capital expense.
OK, so what? The fact is, rising home prices (asset prices in general), are a direct reflection of inflation.
By ignoring asset prices, the Fed helped blow the biggest economic bubble yet. Now the Fed struggles to contain the serious inflation it helped create.
Congress and the President did their part too. One can easily see it in the lead chart. With the economy already goosed, Congress passed the biggest stimulus measure in history.
At the same time the Fed kept it’s inane QE policy going all the way to March 2022.
Biden to Meet Powell
🇺🇸 #Biden to meet Jerome #Powell – White House statement – Reutershttps://t.co/oIx86EulEc
— Christophe Barraud🛢🐳 (@C_Barraud) May 30, 2022
Americans Enraged
President Biden will hold a rare Oval office meeting on Tuesday with Fed Chair Jerome Powell amid the highest inflation in decades, which has angered Americans and hurt his standing with voters https://t.co/j418dUpVr8
— Bloomberg (@business) May 30, 2022
Manchin tears into Biden and the Fed
On April 12, Business Insider reported Manchin Tears into Biden and the Fed.
Sen. Joe Manchin of West Virginia tore into President Joe Biden’s administration on Tuesday for failing “to act fast enough” to stop rising inflation.
The scorching statement comes as the White House tries to quietly woo Manchin back to the table for talks on Biden’s agenda.
“When will this end? It is a disservice to the American people to act as if inflation is a new phenomenon,” Manchin said in a statement. “The Federal Reserve and the administration failed to act fast enough, and today’s data is a snapshot in time of the consequences being felt across the country.”
Guilty Meets Guilty
Americans are enraged, and rightfully so.
Senator Joe Manchin accurately pinned the dual reason, an extremely rare triumph in politics.
Senator Joe Manchin, and to a lesser extent Senator Krysten Sinema, deserve a huge round of applause for saving the country from a further raging inflation inferno from Biden’s Build Back Better plan.
Thank you Senators!
Oil Looking Bullish, President Biden, PM Boris Johnson, and EU Looking Foolish
Meanwhile, inept US, UK, and EU policies are fueling further inflation at the pump.
For discussion, please see Oil Looking Bullish, President Biden, PM Boris Johnson, and EU Looking Foolish
The supply chain disruptions over sanctions are massive and further contributing to inflation.
Also, note the End of the 40-Year Bull in Debt and a “Global Depression” Threat
This post originated at MishTalk.Com.
Thanks for Tuning In!
Please Subscribe to MishTalk Email Alerts.
Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.
If you have subscribed and do not get email alerts, please check your spam folder.
Mish
William McChesney Martin Jr
reimposed interest rate pegs causing the Great Inflation. Volcker turned the
nonbanks into banks causing the S&L crisis. Greenspan dropped legal
reserves by 40% causing the housing bubble. Bernanke destroyed real-estate, the
nonbanks, and the home builders. Powell increased the Gini coefficient to the
highest level in 50 years.
wisdom is wrong: “a flawed and over-simplified monetarist doctrine that posits
a direct relationship between the money supply and prices”. Powell is an idiot: “The
connection between monetary aggregates and either growth or inflation was very
strong for a long, long time, which ended about 40 years ago”.
gauge, 5.3% (Jan), 5.0% (Feb), 4.8% (Mar), 4.7% (Apr) at the same time
long-term money flows, the volume and velocity of money, peaked (a mathematical constant).
Pupils at four primary schools in Wales are to be offered insects to eat as part of a project to gauge children’s appetite for “alternative protein” such as crickets, grasshoppers, and mealworms.