Jay Powell And His Foolish Band Of Keynesian Money-Printers Get Another Wake Up Call

Perhaps Jay Powell has now been properly reminded. To wit, you live by the fiddle, you die by it, too.

As is well-known, awhile back our clueless Fed Chairman began claiming that the inflation battle had nearly been won owing to the plunge of his favorite new dashboard indicator—the CPI Services SuperCore. Never mind that it excluded 75% of the weight in the CPI item basket! This drastically truncated version of the inflation ruler had been heading straight south during the first nine months of 2023—so it was heralded as a leading, less noise-ridden indicator of the rapidly improving overall inflation trend.

Not according to this morning’s CPI report for March 2024, however. The SuperCore trend, which had already reversed higher during recent months, not only continued to rise but went supercritical, increasing at a 0.7% M/M rate and by +5.0% over prior year.

So standby for a new Powell fiddle of the incoming data, perhaps to be called the “Core SuperCore”, which would also exclude transportation services. The latter sub-index was up at a 18% annual rate in March, but its deletion would bring the measure down to, well, just 18.8% of the actual CPI basket.

At some point, therefore, Powell might as well go whole hog, and exclude 100% of the CPI items. Then he’d have a twofer. He could brag that inflation has been reduced to 0.00%, while complaining that his dashboard is now running 200 basis points below target and that the printing presses must be restarted forthwith!

SuperCore CPI Services, 2017-2024

Then again, we’d suggest it’s about time to get real about the Fed’s giant and utterly failed experiment in monetary central planning. That is to say, it has long been evident that in the context of an intricately integrated $105 trillion global economy and $425 trillion deep worldwide debt and equity market that rational, effective and activist monetary policy in one country is impossible.

The leakage through the four walls of the US economic bathtub and the global cross-currents which assail it from every direction are simply beyond mortal comprehension; they make a farce of macroeconomic models and, in any event, are far, far out of the reach of the crude policy execution instruments employed by the Fed and other central banks. That is, interest rate tweaking, persistent large-scale monetization of the public debt and, when all else fails, open-mouth expostulation.

For want of doubt, behold the graph below. It’s about as good a report card on the Fed’s experiment as you can find. It says that just since Greenspan’s arrival at the Fed in August 1987 the purchasing power of domestic wages or savings as of that date has plunged by fully 63%.