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Bernanke Goes All In

Bruce Krasting's picture




 

Bernanke Goes All In

Courtesy of Bruce Krasting

Well, we got an inflation target from the Fed. Basically, thinking at the Fed has been eliminated. The process has been automated. Bernanke has convinced the Fed board to adopt Core PCE as a determinate of monetary policy. So long as CPCE stays below 2%, Ben is going to have his foot planted on the monetary metal. It’s “full speed ahead” according to the Chairman. He's pushed things off until 2014 - a very long time from now.

My question: “Why is the Fed using CPCE versus another measure of inflation?” The very good news is that there is answer, and it comes from a very "reliable" source  – The Federal Reserve. A detailed analysis on this topic was conveniently made public just a month ago.

Alan Detmeister produced a doosey of a report. Ya gotta love the title page:

This beast runs 25 pages, it includes tons of charts and references. It compares the utility of using Core PCE to a dozen other inflation yardsticks. There are easy-to-understand formulas to support the conclusion:

Guess what? Good old Alan makes a compelling argument. Anyone who tries to question the use of CPCE is going to get hit over the head with this report. This is just one of the many charts that prove (according to Detmeister) that CPCE is the only way to go when considering monetary policy:

 

There’s just one teeny problem with Alan’s work. He did all of that comparing and studying using data from pre-2010. Using that information, CPCE lines up very well as a consistent barometer of inflation. But the analysis falls to shit when you look beyond 2009. CPCE took a nose-dive after 2009 (versus CPI and Core CPI):

 

 

Information on CPCE and the other measures of inflation is available monthly. There’s no reason (that I can think of) why the Fed chose to deliberately omit two years of data that would conflict with the “desired’ conclusion. To me, it looks like the authors manipulated the report.

I think the Fed made a mistake targeting inflation. It's now stuck with the choice. It can’t go back on this without looking awfully stupid. The policy of allowing CPCE to determine the direction of monetary policy will last the until the end of Bernanke’s term at the Fed. Then it will be abandoned in favor of more pragmatic approaches to decision making.

I think there is enough monetary juice in the global system for there to be a risk of inflation north of 2%. We shall see. I think Bernanke is going to get his balls squeezed. He deserves that fate, he put them in a vise. As of today, he no longer has choices. He’s made himself a slave to a single dopey statistic.

The markets are the best measures of how people perceived today's announcements from the Fed. The dollar pissed on the Fed in general, the gold market hit Bernanke square in the face with an ingot.

 

 

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Thu, 01/26/2012 - 08:57 | 2099041 falak pema
falak pema's picture

hey n hi Orly, you saw the Eur down below 1.25, last time I saw you post, never happened, so there. But then its a crazy world;have some tandoori chicken. Or grilled swordfish steaks and pepper sauce. Great combination. 

Thu, 01/26/2012 - 11:04 | 2099511 Orly
Orly's picture

No.  You may be mistaken.  I was the one who told Bruce he may have made a bad bet on his Euro puts; that is it would go up before it went down (that was convenient of me, anyway...).  But you're right, of course: no matter...the world is turned upside-down every fifteen minutes.

I have been watching a show called Top Chef Texas.  These guys are pretty amazing but I don't know where they get these crazy ingredients.  This unheard-of pepper, this unheard-of pasta, that unheard-of sauce and that unknown vegetable or fungus!  What's a homegamer to do?!?!?

Here's one without all the fancy-schmancy: http://www.bravotv.com/foodies/recipes/bouillabaisse-in-fennel-pernod-broth .  Sounds yummy, though I'm not a huge seafood fan.  It seems you would enjoy it well, though.  My virtual meal for you, my friend.  Bon apetit!

I am still serious about starting my truffle farm in Kentucky, though.  Whenever the venerable fungus is served on the show, the guests are reduced to looking like kids in a candy store; eyes affixed, mumbling, "Mmmm.  Truffles."  I have never had one but I can see that they're as addictive as crack cocaine.

All I need is a talented piglet and I'm in business.

:D

Thu, 01/26/2012 - 11:40 | 2099599 falak pema
falak pema's picture

Well, glad to know I misread you and you didn't lose your shirt. 

There are a whole bunch of truffles fans where I live who do the local woods over the week-ends looking for truffles and champignons (mushrooms), black trompettes de la mort (great in omelettes), cepes, morilles and girolles. Sorry for froggy names. All good stuff. Pity the sea does not tempt you. Its amazing what we can get from it.

Thu, 01/26/2012 - 11:47 | 2099635 Orly
Orly's picture

Isn't there a certain treee that truffles grow under?

How does one go about "looking in the woods" for truffles? Don't you have to have a pig or a dog or something?

Do you think they grow in Texas?

Are they transplantable?  If I put them in my bonsai garden, would I get miniature truffles?  Ha!

So many truffle questions!

Thu, 01/26/2012 - 13:07 | 2099948 falak pema
falak pema's picture

Here is a site in french on how to find truffles without dog or hog! There is a video in it. So have fun.

http://www.truffe-passion.fr/spip.php?article242

Maybe you'll find an english version.

Thu, 01/26/2012 - 01:32 | 2098899 BigDuke6
BigDuke6's picture

Welcome back Orly.

As u return its time for moi to head off for a while.

i went all in myself at the xmas PM clean out....

now its time to sit back and see how it pans out. 

Thu, 01/26/2012 - 01:40 | 2098898 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

EUR/USD still range bound; no data to change it; everything is priced in.  Why do ypu think the USD is trading with the CNY?  Maybe the EUR is showing strength??

Wed, 01/25/2012 - 23:09 | 2098644 vainamoinen
vainamoinen's picture

Sorry, I've moved beyond all this. I'm into "Zen dada" now.

If it's not immediate and it's not meaningless then I can't dig it.

Can you dig it?

Wed, 01/25/2012 - 23:07 | 2098633 Stax Edwards
Stax Edwards's picture

Page not found at the FED link.  Removed?

Thu, 01/26/2012 - 00:09 | 2098758 guidothekp
guidothekp's picture

There was a space at the end of the URL. The correct URL is this:

 

http://www.federalreserve.gov/pubs/feds/2011/201156/201156abs.html

Wed, 01/25/2012 - 23:05 | 2098632 vainamoinen
vainamoinen's picture

Sorry, I've moved beyond all this. I'm into "Zen dada" now -

If it's not immediate and it's not meaningless, I can't dig it.

Can you dig it?

Wed, 01/25/2012 - 23:43 | 2098708 VelvetHog
VelvetHog's picture

Suomalainen?

Wed, 01/25/2012 - 23:48 | 2098713 akak
akak's picture

Paivaa!  Mita kuuluu?

Thu, 01/26/2012 - 00:35 | 2098798 sampo
sampo's picture

Parikymmentä astetta pakkasta.. HRRR

Thu, 01/26/2012 - 03:51 | 2098980 Cast Iron Skillet
Cast Iron Skillet's picture

Finnish! cool! Sorry for not being able to understand 1 word of it, however.

Thu, 01/26/2012 - 05:48 | 2099017 akak
akak's picture

No hay de que, amigo!

Mais maintenant, j'ai aller a dormir.

Do widzenia.  Hasta luego.

Wed, 01/25/2012 - 22:53 | 2098601 Schmuck Raker
Schmuck Raker's picture

Give 'em hell, Bruce.

Wed, 01/25/2012 - 23:02 | 2098627 Eireann go Brach
Eireann go Brach's picture

Great reporting Bruce! Personally I would loved to put Bernanke's head in a vice aka Snatch style and make him squeal like a fucking pig until he promises to stop printing!  I think an eyeball and a nostril may pop before he gives in though LOL!

Wed, 01/25/2012 - 22:47 | 2098579 Zer0head
Zer0head's picture

Oh, and while distracted with the BS from the Fed it might be of value to return back for a moment to the day to day world we live in, where our special friend Google is about to fuck us all right up the kitty with their new privacy (lack of that is) geo tracking we will monitor everything you do online policy and keep that data just case you or someone else might need it some day

 

It all begins March 1, 2012 the day Google died.

 

http://www.google.com/policies/

 

Wed, 01/25/2012 - 23:05 | 2098634 a growing concern
a growing concern's picture

You should already be using Tor for those things that you wouldn't want someone else seeing.

Wed, 01/25/2012 - 23:21 | 2098666 Hansel
Hansel's picture

And use duckduckgo for search.  They log nothing.  Block all google cookies and use something like noscript or ghostery to block all the javascript tracking.  Google can suck it.

Thu, 01/26/2012 - 05:39 | 2099016 sumo
sumo's picture

Another search engine that doesn't log is ixquick (https://www.ixquick.com/), which has a Firefox add-on.

I heartily recommend ghostery.

Wed, 01/25/2012 - 22:42 | 2098572 Hansel
Hansel's picture

Core PCE isn't even in FRED.  WTF!

Wed, 01/25/2012 - 22:37 | 2098559 rajat_bhatia
rajat_bhatia's picture

the dolar iz bouncin

Wed, 01/25/2012 - 22:36 | 2098552 eddiebe
eddiebe's picture

CPCE, Certified Professional Catering Executive. CPCE, Community of Protestant Churches in Europe (Vienna, Austria). 

Taking on Catering executives and Protestant Churches at once? Bernanke will certainly have his balls crushed, no doubt!

Wed, 01/25/2012 - 22:35 | 2098548 take me back
take me back's picture

From HBO John Adams. Thomas Jefferson in his infinite widom and ability to predict the future encounters Alexander Hamilton.
Hamilton's ideas are a foreshadowing of the current financial situation the US is in today. If only they had listened to Mr. Jefferson.

Thomas Jefferson warns of the dangers of central banks and national debt

http://www.youtube.com/watch?v=UrxKOO0nKwc&feature=related

Wed, 01/25/2012 - 23:12 | 2098653 a growing concern
a growing concern's picture

John Adams is a fantastic book and fantastic miniseries.

Fri, 01/27/2012 - 12:47 | 2102740 Melin
Melin's picture

ditto that.  I love that man.  What he went thru for liberty's sake is truly amazing.

Wed, 01/25/2012 - 22:32 | 2098541 disabledvet
disabledvet's picture

you mean "the markets of today." we have a historical record. POST IT! Here, let me help you out: "since Ben Beranke began his debt monetization scheme interest rates have done this."_________
___________
____________
_________
sound about right? now who are we to complain if the price of gold soars? (it won't) the price of silver soars? (it won't...much) the price wheat soars? (eh, this one's a problem.) Indianapolis goes bankrupt? (absolutely gonna happen.) Are we running for office around here? So the guy has amazing theories? The bottom line is he has been presented with a simple task "generate copius quantities of inflation without psycho bond guy killing us so we can keep spending trillions and everything will think everything's hunky dorry." So far i'd say he's done AMAZINGLY well! I mean Ben Bernanke's not elected...and when he's done he can go back to Princeton and wonder "wow, I never thought of that" when the Europeans try and do the same thing. Or say "man, i wouldn't do that if i were them" while listening to "Disco Duck" on his 45 record player. Does it really matter? Any of it?
http://www.youtube.com/watch?v=XA-01q_oF6g&feature=player_detailpage

Wed, 01/25/2012 - 22:31 | 2098537 akak
akak's picture

Bernanke, you are a traitor and a financial terrorist.

Pray you never meet me on the street.

Wed, 01/25/2012 - 22:58 | 2098616 john39
john39's picture

calling him a traitor assumes that at some point in the distant past, he was on the side of the american people.    he and his ilk were never on the side of the american people.  just part of the parasite apparatus, preparing the people for the slaughter.

Wed, 01/25/2012 - 23:17 | 2098662 akak
akak's picture

True.

The first time I ever heard the words "threat of deflation" out of his lisping mouth, I knew we were dealing with a criminal and a sociopath.

 

Wed, 01/25/2012 - 22:30 | 2098535 alien-IQ
alien-IQ's picture

I should be able to sort out that "calculation" by about...2015...maybe.

WTF was that?

Thu, 01/26/2012 - 02:01 | 2098924 Seer
Seer's picture

Well, we WILL find out that the answer is 42, right?

Thu, 01/26/2012 - 05:09 | 2099007 ViewfromUnderth...
ViewfromUndertheBridge's picture

The key price level after which gold goes parabolic is $1,764 according to Jim Sinclair from a formula derived from Jesse Livermore's trading (Jim's dad's partner). The formula is called "The Square of the Numbers"...if you are still with me, that is 42 squared.

Thu, 01/26/2012 - 05:20 | 2099010 akak
akak's picture

But gold has already reached that price, and well beyond it, several months ago, with no parabolic rise thereafter.

???

Wed, 01/25/2012 - 22:29 | 2098532 Zer0head
Zer0head's picture

Anyone who tries to question the use of CPCE is obviously an excellent test candidate for the NDAA.

Wed, 01/25/2012 - 22:30 | 2098531 The Matthaus
The Matthaus's picture

Who says they won't just alter the CPCE? After all when you grade your own test it's hard to fail.

Wed, 01/25/2012 - 22:28 | 2098524 Mutatto
Mutatto's picture

"The dollar pissed on the Fed in general"

I don't get that comment.  A weak dollar has been has been the goal, more or less, since 1913 and the beginning of deficit finance.  Why would the bernanke be offended by the drop in the dollar today?

Wed, 01/25/2012 - 22:35 | 2098549 Zer0head
Zer0head's picture

the key Mutatto is the word pragmatic

 

that wonderful image of the pissing guard would be for not without the  dollar pissed reference

Wed, 01/25/2012 - 22:28 | 2098518 Manthong
Manthong's picture

It's their core S&P price appreciation and gold/silver price suppresion targets that rile me. 

Wed, 01/25/2012 - 22:28 | 2098516 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

That's what he looked like today; like his balls were in a vice.  What's funny about that is if you watch the video Luke Radowski took of him hob nobbing with the fat cats of New York he looks calm and relaxed.  Part of me thinks he is a better actor than Obama.  Part of me doesn't know what to think anymore.  How this shitshow continues I really don't know.

I mean, I have thought that the American people, and the people of the world too, were getting raped.  Now I think it is some BDSM shit that we here on ZH are watching in disgust, thinking about how it's horrible, when in fact, the people we are watching like it.

Thu, 01/26/2012 - 01:17 | 2098804 Al Gorerhythm
Al Gorerhythm's picture

With the Bernank setting interest rate policy at an effective o% (negative when taking into account his targeted inflation rate) for the next two years, I guess his work here is done. He may as well play golf until 2115 and I may as well keep stacking. I'm all in apart from my house. Thinking about throwing it into the PMs as well. At least I won't be paying local holding taxes.

Wed, 01/25/2012 - 22:47 | 2098583 4shzl
4shzl's picture

TYX isn't fooled and doesn't like it.  Today's brief dip was swiftly and completely reversed.  Look for the long bond to lead the march north in yields.

Thu, 01/26/2012 - 00:06 | 2098751 whatsinaname
whatsinaname's picture

Neither did TNX...

Thu, 01/26/2012 - 03:46 | 2098976 WaterWings
WaterWings's picture

"Debt"meister - the irony.

Thu, 01/26/2012 - 07:14 | 2099053 French Frog
French Frog's picture

"The policy of allowing CPCE to determine the direction of monetary policy will last the until the end of Bernanke’s term at the Fed. Then it will be abandoned in favor of more pragmatic approaches to decision making."

That's a rather hopeful statement: what makes you think that the next Chairsatan is going to be more pragmatic that the current one?

Fri, 01/27/2012 - 12:42 | 2102730 Melin
Melin's picture

A better question is:  Why is employing Pragmatism considered a positive?  It's unprincipled, ends-justify-the-means thinking.

“To give you an example: if a building were threatened with collapse and you declared that the crumbling foundation has to be rebuilt, a pragmatist would answer that your solution is too abstract, extreme, unprovable, and that immediate priority must be given to the need of putting ornaments on the balcony railings, because it would make the tenants feel better.

There was a time when a man would not utter arguments of this sort, for fear of being rightly considered a fool. Today, Pragmatism has not merely given him permission to do it and liberated him from the necessity of thought, but has elevated his mental default into an intellectual virtue, has given him the right to dismiss thinkers (or construction engineers) as naive, and has endowed him with that typically modern quality: the arrogance of the concrete-bound, who takes pride in not seeing the forest fire, or the forest, or the trees, while he is studying one inch of bark on a rotted tree stump.”

 

The Ayn Rand Letter, I, 26, 5 (grabbed from the Ayn Rand Lexicon)

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