JACKSON HOLE, Wyo. -- The
six-months-ahead prices-paid index
rose to 23.9 in August from 23.1 in July. It has now tacked on 24.9 points since last autumn.
Only once before during the current business cycle has this index has risen so much over a nine-month period.
And that was between November 1993 and August 1994.
A period that had the
jacking up the
to the tune of almost 2 full percentage points.
Is now the same as then? Is it about to be?
Only an idiot would make such a claim.
The levels of both the Philly Fed and the
price indices are still lower now than they were then -- 23.9 against 39.3 in the case of the former and 54.7 against 63.0 in the case of the latter. And, though the
leading inflation index is now accelerating faster than it was at the time of the March 1997 and June 1999 tightenings, it is not growing as quickly as it was during the 1994 tightening cycle.
And therein lies the key fact that separates the idiot from the realist.
It is not the case that the leading price indicators argue for no Fed action at all.
It is the case that they now argue for action less aggressive than the kind we saw back then.
The folks out there who are arguing that the
will not (and should not) tighten next week -- and there are loads of them out there -- are smoking something terribly potent.
Putting Shame in Your Game
For almost a year now -- and in many cases much longer -- the New Era types have been forecasting sharply lower market interest rates, no Fed tightening (and even easing), a material slowdown in economic growth and a continuation of the kind increases the broad price measures have been posting.
And they have proved dead right on all of those counts -- all save the first three.
And now they are ticked off. More so than they've ever been.
That's because they cannot find an Old Era guy to stand up and admit that he has been dead wrong about the performance of the broad price measures.
And so here your narrator will take the opportunity to do precisely that.
I have been dead wrong about the performance of the broad price measures.
The fact that I have been calling for them to accelerate plus the fact that they have not accelerated equal the fact that I have been dead wrong about the performance of the broad price measures.
And so now you have a choice to make.
You can listen to the people who have been dead wrong about interest rates and the Fed and the economy but dead right about the broad price measures, or you can listen to the people who have been dead right about interest rates and the Fed and the economy but dead wrong about the broad price measures.
In short, you can spend your time in one of two ways.
You can sit around with other New Era types and agree that you're all much brighter than the Feds -- that the Feds obviously just don't get it, that they're just plain stupid for even considering tightening -- while you push forward your same stale slowdown forecast for another quarter and continue to get your butt kicked in the bond market, all the while congratulating yourself for being so right about the performance of the broad price measures.
Or you can try to think like the Feds think and to dig and work to come to realistic conclusions about the future of both interest rates and the economy.
One of those will work to make you noble and smug, and the other will make you money (and keep you from losing it).
Think hard about it.
Then choose the one that's right for you.
Anything Blair Witch.
Tired-ass Mouth columns.
The possibility of a subway series.