March 3, 2024


Today’s Events in Historical Perspective
America’s Longest-Running Column Founded 1932
Dear Jerome
By Douglas Cohn and Eleanor Clift         
          WASHINGTON — On February 11 our column’s headline read “The Inflation Fallacy.” Today, we update with a plea to Jerome Powell the Fed chairman who is blindly driving down a factually erroneous road,  leaving failed banks and incredulous economists in his wake.
          Our plea and the plea from anyone who actually read the statistics: Chairman Powell, quit raising the discount rate (the rate the Fed charges banks to borrow money). Quit spewing false data. Quit undermining the economy.
          Chairman Powell indicated the Fed will keep raising interest rates until inflation falls below 2 percent. But it already did; it already is. He says the current inflation rate is 5 percent. It is not. It is 1.2 percent.
          In February we explained, deriving information from the U.S. Bureau of Labor Statistics:
          “Inflation for the month of October was 0.4 percent or 4.8 percent on an annualized basis. For the month of November, it was 0.1 percent or 1.2 percent annualized. And for the month of December, it was a stunning -0.1 percent (yes, minus .1 percent) or -1.2 percent annualized. That is the definition of deflation, not inflation.”
          The December figure was later adjusted to .1 percent or 1.2 percent annualized.
          January came in at .5 percent or 6 percent annualized, and February registered .4 percent or 4.8 percent annualized. Then March came back down to .1 percent.
          Here are the annualized numbers in a chart:
          October 4.8 percent
          November 1.2 percent
          December 1.2 percent
          January 6 percent
          February 4.8 percent
          March 1.2 percent
          The average for these six months is .27 percent per month or 3.2 percent for the year. In other words, it is not the 5 percent being quoted by the Fed. Further, the trend is down, not up, and 1.2 percent predominates.
          Even so, if Powell and the Fed should focus on the current monthly CPI rates rather than factoring in the June CPI as we previously wrote: “The monthly inflation rate for last June was 1.3 percent which on an annual basis would equal 15.6 percent. But what does that aberration have to do with the future? All it did was skew the annual inflation rate for 2022, and why would the Fed or anyone else base future decisions upon it?” So, by averaging in an aberration from last summer, the Fed proclaimed the current rate of inflation to be 5 percent, which it clearly is not.
          Instead, if 2 percent is the goal, the Fed should have lowered the discount rate after the November, December, and March CPIs were announced, and raised it after the October, January, and February CPIs came out. But Powell and the Fed did not do that. They simply raised the rate every single month, turning a blind eye to reality, and doing their best to drive the economy into a recession.
          See Eleanor Clift’s latest book Selecting a President, and Douglas Cohn’s latest books The President’s First Year: The Only School for Presidents Is the Presidency and World War 4: Nine Scenarios (endorsed by seven flag officers).
          Twitter:  @douglas_cohn
          © 2023 U.S. News Syndicate, Inc.
          Distributed by U.S. News Syndicate, Inc.

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