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Friday, April 28, 2006

FED CHIEF BEN BERNANKE ON INFLATION

FED CHIEF BERNANKE ADMITS FLAWS IN 'CORE' INFLATION MEASURE-

It's comforting to see that there is really intelligent life present in Washington, D.C., namely Fed Chief Ben Bernanke and certain members of the Joint Economic Committee. I caught his testimony on C-SPAN during the wee hours of this morning.

But one of the more interesting exchanges occurred shortly after a Republican Senator had praised the Fed's performance on keeping inflation low during the past two decades. He recited his kudos while exhibiting an impressive chart wheeled in by the senator's staffers.

But the next to speak, a Republican Representative from Texas said (to paraphrase)

"Mr. Bernanke, to be quite honest with you, my constituents back in Texas would not agree with that chart at all. With the price of oil, medical care, education and even food soaring, there simply is no way inflation is being contained at anything like 3 or 4 %. Don't you think the inflation statistics should be adjusted to reflect what's actually going on in the real world with real people?"

Bernanke replied that "while the 'core' inflation numbers certainly did not reflect oil, food and medical care because of their month-to-month volatility, it was a serious concern to the Fed that these components of 'real world inflation' were soaring and..."

And What? As I pointed out in a previous post, the Federal Government makes the inflation numbers say what it wants them to say!

A recent article in Barron's even pointed out that if employment numbers were counted as they were during the Great Depression and without tossing out 'discouraged workers' various 'underemployed', etc., the actual unemployment rate would be closer to 12% and not 4 1/2 - 5%. Welcome to NewSpeak (George Orwell's 1984).

But that's a topic for another day (and post). Next post is on Gold...

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