{"id":45848,"date":"2019-05-01T09:46:09","date_gmt":"2019-05-01T14:46:09","guid":{"rendered":"https:\/\/olduvai.ca\/?p=45848"},"modified":"2019-05-01T09:46:12","modified_gmt":"2019-05-01T14:46:12","slug":"the-feds-dangerous-inflation-game","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=45848","title":{"rendered":"The Fed\u2019s Dangerous Inflation Game"},"content":{"rendered":"\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/dweaay7e22a7h.cloudfront.net\/wp-content_3\/uploads\/2017\/05\/shutterstock_240154183-650x360.jpg\" alt=\"The Fed\u2019s Dangerous Inflation Game\"\/><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\"><a href=\"https:\/\/dailyreckoning.com\/the-feds-dangerous-inflation-game\/\">The Fed\u2019s Dangerous Inflation Game<\/a><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">By now you\u2019ve heard that the U.S. economy expanded at an annualized rate of 3.2% in the first quarter of 2019. That was reported by the Commerce Department last Friday morning.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">That strong growth coming on top of 4.2% in Q2 2018 and 3.4% in Q3 2018 means that in the past twelve months, the U.S. economy has expanded at about a 3.25% annualized rate. That\u2019s a full point higher than the average growth rate since June 2009 when the expansion began and it\u2019s in line with the 3.22% growth rate of the average expansion since 1980.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">It looks as if the \u201cnew normal\u201d is back to the old normal of 3% or higher trend growth. Or is it?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The headline growth rate of 3.2% was certainly good news. But, the underlying data was much less encouraging. Most of the growth came from inventory accumulation and government spending (mostly on highway projects). But, business won\u2019t keep building inventories if final demand isn\u2019t there. That\u2019s where the 0.8% growth in personal consumption is troubling.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The consumer didn\u2019t show up for the party in the first quarter.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If they don\u2019t show up soon, that inventory number will fall off a cliff. Likewise, the government spending number looks like a one-time boost; you can\u2019t build the same highway twice. Early signs are that the second quarter is off to a weak start.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Dig deeper and you can see that core PCE (the Fed\u2019s preferred inflation metric) cratered from 1.8% to 1.3%. That\u2019s strong disinflation and dangerously close to outright deflation, which is the Fed\u2019s worst nightmare.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The data just show that the Fed is as far away as ever from its 2% target. But why should it even have 2% as its target?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp;\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Fed\u2019s Dangerous Inflation Game By now you\u2019ve heard that the U.S. economy expanded at an annualized rate of 3.2% in the first quarter of 2019. That was reported by the Commerce Department last Friday morning. That strong growth coming on top of 4.2% in Q2 2018 and 3.4% in Q3 2018 means that in [&hellip;]<\/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":[11023,303,391],"class_list":["post-45848","post","type-post","status-publish","format-standard","hentry","category-economics","tag-daily-reckoning","tag-fed","tag-growth"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/45848","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=45848"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/45848\/revisions"}],"predecessor-version":[{"id":45849,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/45848\/revisions\/45849"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=45848"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=45848"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=45848"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}