{"id":10536,"date":"2015-07-30T06:18:56","date_gmt":"2015-07-30T11:18:56","guid":{"rendered":"http:\/\/olduvai.ca\/?p=10536"},"modified":"2015-07-30T06:18:56","modified_gmt":"2015-07-30T11:18:56","slug":"fed-is-not-just-behind-the-curve-its-driving-the-bus-over-the-cliff","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=10536","title":{"rendered":"Fed Is Not Just Behind The Curve, It\u2019s Driving The Bus Over The Cliff"},"content":{"rendered":"

Fed Is Not Just Behind The Curve, It\u2019s Driving The Bus Over The Cliff<\/a><\/h3>\n

So the Fed didn\u2019t raise rates again. And the timing of the rate increase will be data dependent. Ho hum.<\/p>\n

There\u2019s just one little problem.\u00a0The inflation measures the Fed\u00a0watches really don\u2019t measure inflation.\u00a0The Fed won\u2019t see\u00a0what its cronies in the government and economic establishment refuse to measure, which is that we\u2019ve already long since passed the Fed\u2019s 2% inflation target.<\/p>\n

Every 3 months the US Census Bureau releases the results of its quarterly housing survey. We now know that rents rose by 6.2% year over year in the second quarter. But\u00a0the fictitious number that the BLS uses to account for housing costs in the CPI, called Owner\u2019s Equivalent Rent (OER), is only up\u00a0by +2.9% year over year. The difference of 3.3% is known by the technical term: fudge factor. In this case, the BLS is undercounting the housing component of CPI by more than half.<\/p>\n

Owner\u2019s equivalent rent and actual renter\u2019s rent account for 31% of the total weight of the CPI.\u00a0\u00a0Multiplying the weighting of this component by the 3.3% fudge factor\u00a0cuts a full 1% off the headline CPI and 1.3% off core CPI. If rent were counted accurately, headline CPI would be 2.2%, year over year, not 1.2%. Core CPI (excluding food and energy) would be +3.1%, not 1.8%.<\/p>\n

Since Core has lately been stronger than the headline\u00a0number, the Fed has naturally shifted its focus away from Core. But it doesn\u2019t matter. The Fed is behind the curve. Way behind.<\/p>\n

\"Actual<\/a><\/p>\n

Click to view chart from email<\/a><\/h6>\n
The BLS counted actual housing prices in CPI until 1982, but it got too expensive.\u00a0The Federal Government uses CPI to index government salaries and benefits, and major employers often use it for the same purpose. So back in 1982 business and government came together and got the\u00a0BLS to find a way to fudge the housing component of CPI so that it would understate inflationary reality.\u00a0<\/span><\/div>\n

…click on the above link to read the rest of the article…<\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Fed Is Not Just Behind The Curve, It\u2019s Driving The Bus Over The Cliff So the Fed didn\u2019t raise rates again. And the timing of the rate increase will be data dependent. Ho hum. There\u2019s just one little problem.\u00a0The inflation measures the Fed\u00a0watches really don\u2019t measure inflation.\u00a0The Fed won\u2019t see\u00a0what its cronies in the government […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[926,5979,172,303,305,426,1154,6202,7660],"class_list":["post-10536","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bls","tag-contracorner","tag-cpi","tag-fed","tag-federal-reserve","tag-inflation","tag-interest-rate-policy","tag-lee-adler","tag-us-census-bureau"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/10536","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10536"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/10536\/revisions"}],"predecessor-version":[{"id":10537,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/10536\/revisions\/10537"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10536"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10536"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10536"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}