Informed advice from those that know27 May 2021 09:56
Given one of the largest influencers ( Libernum is of course not one, at least not to me)on the planet is the Fed, and the Chairman reigns supreme, It is interesting to look at the history of advice and actions.
The Fed’s legendary chairman (there have been a few LOL), Arthur Burns, brought a unique perspective to the US central bank as an “expert on the business cycle” (OK yes, he was an economist! Who I think have done more damage than the communists but that’s another story, wink wink, nudge, nudge). Burns argued that central bankers had the tools to curb inflation in the 1960s and 1970s but ignored them after the Fed found itself "caught up in the philosophic and political currents that were transforming American life and culture”.
Burns was prone to segment the problems he faced as a policymaker, especially the emergence of what would soon become the “Great Inflation”. Like business cycles, he believed price trends were heavily influenced by exogenous, factors – “noise” that had nothing to do with monetary policy (Blame everyone else virus).
When US oil prices quadrupled following the OPEC oil embargo in the aftermath of the 1973 Yom Kippur War, Burns argued that, since this had nothing to do with monetary policy, the Fed should exclude oil and energy-related products (such as home heating oil and electricity) from the CPI… it only had a weight of more than 11 per cent in the CPI ?
In 1973 Burns proclaimed surging food prices were traceable to unusual weather (El Niño) events that had decimated Peruvian anchovies in 1972… further he insisted that this was the source of rising fertiliser and feedstock prices, in turn driving up beef, poultry and pork prices..so his order was to take food ( a weight of 25 per cent!?!) out of the CPI…and away we go …
This led to the preferred metric of the core inflation rate – that “purified” portion of the CPI that purportedly is free of the volatile “special factors” of food, climate change (wasn’t spoken about then much) and energy, where gyrations were traceable to distant wars and weather…and the odd stray pandemic?
Well if you believe everything you read from the politicians and the government about inflation, and even better core inflation, good luck and good night.
Advice (for free, no agenda's or commissions) Set up your own CPI, lets call it i-CPI, and watch this with great interest.
Now inflation aside, in Australia it is very clear there has been wage stagnation for several years. Further, with everyone turned onto social media, jobseekers, government handouts of various flavors, covid tests, security tests etc ad nauseum, that productivity has dived? Lets not debate what is being produced for whom and why? Society benefit, well that’s off the agenda?!
My bet is the music will stop, people will turn off, and wake up and gold will ignite as being far more dependable and valuable than snake oil, political ideologies, cpi analysis etc.
Go gold, and CEY
Good luck to us
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