I would like to take you back to 2012. Just a few short years after the soul-searching-scary Great Financial Crisis of 2008-9, market participants had finally given up their worry of the next great depression enveloping the globe, but had replaced it with an equally fervent fear that inflation would uncontrollably explode. The Federal Reserve had recently completed their second round of quantitative easing, much to the chagrin of a large group of distinguished economic thinkers who had gone as far as writing an open letter to the Fed Chairman pleading he reconsider the program.
You remember that old A&E show Intervention? Well, this was like an academic peer episode – more neck beards and sophisticated language, but sadly, the same amount of crying.
So when the Fed’s favourite inflation gauge, the Core PCE index, spiked up to 2% in 2012, it was especially hard on Chairmen Bernanke. After all, his colleagues had just warned him that this was about to happen.
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