Yellen "Does Not Fully Understand Inflation" So Here It Is Explained In Just One Chart

In what has been the most stunning admission by Janet Yellen so far during her press conference, the Fed Chair said that "we don't fully understand inflation" and added that the "shortfall of inflation this year is more of a mystery."

With all due respect, it's not. But since the Fed is often confused, we would like to do the central bank a favor and "explain" inflation, or the lack thereof as the Fed laments, with just one chart.

To simplify enough that everyone on the FOMC will understand, here it is:

  • Real economic prices: no inflation.
  • Asset prices: rampant, and in some case soaring, inflation.

And just in case there is still confusion, here is Goldman:

The long economic cycle that we have been enjoying is, in part, a reflection of loose monetary conditions and low interest rates. Exhibit 17 is a simple but effective way to demonstrate this effect. Taking data back to 2009, the start of the period of extraordinary monetary policy, we can see a very big difference between ‘prices’ in the real economy – measures of wages, consumer price inflation, house prices, commodities – and asset prices. Also shown here is the long-run average nominal GDP growth and nominal GDP growth over this period for the US and Europe (in red). Financial assets have significantly outstripped both nominal GDP growth and inflation in the real economy, largely as a result of rates staying low.

So, dear Janet, the next time you are so worried about the "shortfall" in inflation, maybe just pull up a random ticker...


NugginFuts Wed, 09/20/2017 - 14:57 Permalink

Nonsense. All the inflation is in the stock market. Where did all the QE and ZIRP funds go? Where did the cheap debt fueled corporate buybacks go? Where did yield seeking funds go? Where did savings go when yields hit 0%? Stock market. There's your inflation. 

spastic_colon Ghost of PartysOver Wed, 09/20/2017 - 15:06 Permalink

yes this is the explanation; all of the econ reports have been statiscally modified to never reflect the current reality.....she understands this f**king perfectly.also, the statement "Real economic prices: no inflation." is bullsh*t, "prices" may not have risen as fast as quantities have fallen, as long as it is a "price" measure they can fudge the numbers indefinetly or until it costs the same for 0 ounces in 20 years as it costs for 12 ounces today.

In reply to by Ghost of PartysOver

GUS100CORRINA nope-1004 Wed, 09/20/2017 - 15:26 Permalink

Yellen "Does Not Fully Understand Inflation" So Here It Is Explained In Just One ChartMy response: I hate to POOP in everyone's cheerios, but this CHART is WRONG!!!The REAL INFLATION is not the ASSETS PRICES, but the DEBT BURDEN that was used to create this FAKE WEALTH!! The CAGR for DEBT is well above the CAGR for ASSET PRICES. By the way, if there is a MARKET RESET to be politically correct, the ASSET PRICES will deflate while the DEBT BURDEN will inflate. Welcome to the American Nightmare.

In reply to by nope-1004

Not Too Important nope-1004 Wed, 09/20/2017 - 15:32 Permalink

Rising food prices in developing nations can be attributed to the citizens of those nations seeking more sophisticated diets.- Bernocchio, 2012 No, it has to do with developing nations being forced to use GMO seed stock and massive amounts of Round-Up. Since the GMO crops don't produce seeds that the farmers can use for their next cycle of crops, they have to buy more GMO seed.Sophisticated diets, my ass. The people that live in developing nations are being forced to consume food guaranteed to give them and their children GMO/Round-Up cancers, which they also can't afford to treat. Not to mention that we now know chemotherapy causes cancers to spread, so who is going to provide billions of third-worlders with the new immune-booster cancer drugs that cost $9,000 every three months? Or are they just going to use foreign aid - foreign taxpayers - money to kill them all with chemo?If you thought you knew how deep the Evil goes, think again.

In reply to by nope-1004

Not Too Important davinci7_gis Wed, 09/20/2017 - 15:35 Permalink

Question, Houstonian. How are they handling the widespread dispersion of the chemicals and petroleum products that have mixed and are now soaking the housing and soil? Is anyone testing the neighborhoods to see if it's even safe to move back in, or rebuild?I would think the insurance companies would want this info before they allowed any reconstruction to begin. It looks like Houston is now one big Superfund site.

In reply to by davinci7_gis

S Spade NugginFuts Wed, 09/20/2017 - 17:17 Permalink

Our inflated markets are resultant of the FED funny money infusion dilluting the value of our currency and institution/fund collusion using program trades to FIX markets and squeeze/extort the remaining wealth from the short interest, most of the volume these days is simply shares being shoveled traded back and forth between current owners to bump prices.  Real inflation, you can find that in the grocery store.

In reply to by NugginFuts

Chippewa Partners Wed, 09/20/2017 - 15:01 Permalink

Ask her.  She will tell you it's all "transitory".     These FED fraudsters, in bed with Congress, need to be shut down.   The bubble is evident. Inflation is evident.  It's unwinding now and they don't even know it. 

Not Too Important gregga777 Wed, 09/20/2017 - 15:49 Permalink

Here's a question re: the 'Jews'. If a child is born and raised a 'Christian', and in his later teen years becomes a 'Buddhist', is he still a 'Christian' that became a 'Buddhist', or is he simply a 'Buddhist'?If a child is born and raised 'Jewish', but decides later to worship 'Lucifer', are they still 'Jewish', or are they 'Luciferian'?So, regardless of what anyone is raised as, when they make a conscious choice to worship Lucifer, do we still refer to them as what they were raised as as children?Not every 'Jew' worships Lucifer. Not every 'Christian' worships Lucifer. Not every 'Muslim' worships Lucifer. We are only concerned with those that do worship Lucifer, as they are the ones the control the levers of the West.Just trying to define the true battlelines.

In reply to by gregga777

NoWayJose Wed, 09/20/2017 - 15:05 Permalink

What US home prices are you looking at?
Homes are an asset being upbid - then rented. The tax assessor thinks my home is worth 25% more than 2 years ago!