SMM News: the current inflation in the United States continues to be below the Fed's target of 2 per cent, causing market concern and the possibility of interest rate cuts again, but also triggered many experts to question the authenticity and reliability of the US inflation data.
In a recent interview with Wharton, Alan Greenspan, the former chairman of the Federal Reserve, said the statistics were biased. Greenspan said:
There is no doubt that we cannot move forward at the deficit level of $1 trillion without final inflation.
Asked what he thought of the Fed's 2% inflation target, Greenspan said the measurement of inflation could be complex. "when the new product is on the market, the price is relatively high. And as technology advances, prices are falling. "
In measuring inflation, Mr Greenspan said, "you don't start to see the first level [of higher prices] until you enter the downward phase, so the statistics are biased." If the inflation rate is 2%, it is actually zero for consumers, he added.
But if the US continues to run a huge budget deficit, all hopes will be dashed. "if you print a lot of money, you'll get a higher price."
Wall Street Journal columnist Andy Kessler agrees with Greenspan in his latest article. He even believes that all common inflation indicators have exceeded 2%, perhaps even more than 5%, because the Bureau of Labor Statistics statistics ignore the fact that technology costs have fallen over time:
Mr. Greenspan's "statistical bias" is one of my favorite words these days. The impact is shocking.
Perhaps negative interest rates are not unnecessary. Perhaps the stock market bubble reflects the true value of the economy, not flawed government data. Perhaps the price-to-earnings ratio is not that high. Perhaps the ratio of debt to GDP is not so worrying. Perhaps worker productivity is setting a new record, not perfunctory.
Another financial media columnist has made a similar point before.
Jesse Colombo, a columnist for Real Investment Advice, argues that those "low inflation" arguments are simply untenable. We are in an abnormal economic cycle hand-made by the central bank, and the resulting inflation is highly concentrated in asset prices rather than the consumer prices discussed every day.
Colombo said that CPI in the United States is not simply piecing together prices into an index, but also makes a variety of adjustments, the most famous example of which is the "hedonistic quality" adjustment. For example, after the technological upgrading of technology products, because of the improvement in the "enjoyment quality", it will be included in the CPI at a discount.
If the "CPI price" of an eight-core processor computer is $1000, compared with the market price of $1300 for the 16-core processor computer that went on sale two years ago, the latter is priced at $800 after "hedonistic adjustment" to the CPI. For consumers who spend $1300 on computers, such an adjustment makes no sense.
More importantly, as a large number of technology products have entered the consumer market over the past 40 years and iterated very quickly, These "drag" factors directly drag down inflation growth caused by "big consumer goods" such as housing, health care and higher education. While it is a good thing that mobile phones, computers and laptops are cheaper, it also makes it impossible for America's core inflation indicators to reflect the pressure on personal finances from changes in health care, housing and college spending.