May 10, 2018

Now it´s used car prices and plane fares that “frustrate” the Fed

According to Bloomberg: U.S. consumer prices rose by less than forecast in April as costs for automobiles and airfares declined, reducing chances that inflation will run significantly above the Federal Reserve’s target in coming months. The “analytical” example comes from above; after all, didn´t the Fed just recently put the “blame” for low inflation on cellphone connections and drug prices? Until the Fed (and pundits) start analyzing inflation from a monetary (not interest rate), instead of from an unemployment or price perspective, not much will be accomplished. The idea that the stance of monetary policy is indicated by the level… Read More

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Echoes from the distant past show nothing has been learned

The discussion today: The unemployment rate dropped to its lowest level in nearly 18 years in April, feeding a debate that has long puzzled economists: How low can joblessness fall before a boon for the economy turns into a burden? Flash back more than twenty years. In 2001, Alan Blinder and Janet Yellen published “The fabulous decade – Macroeconomic lessons from the 1990s”. In chapter 6 “The Fed forbears and the Phillips Curve cooperates”, we read: The state of the U.S. economy looked superb at the start of 1996, and it just kept getting better over the ensuing years. The… Read More

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Australia, like the West Coast and some other regions of the US, or Canada and Great Britain, faces an explosion in house prices. The Reserve Bank of Australia recently issued a study concluding that in 2016 a whopping of A$488,944 of a typical A$1.16 million house price in Sydney was due to tight property zoning.  The RBA also says the zoning costs have been worsening. As bad as that is, I suspect the RBA actually understates matters, as they seem accept on face surging Sydney land values. But with an abundant supply of free-market housing, how valuable would Sydney land… Read More

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