Tuesday's Wall Street Journal carried an editorial describing audience reactions to New York Fed President Bill Dudley, a Goldman Sachs veteran, as he tried to explain that the cost of living isn't rising.
Apparently, Dudley said,
"Today you can buy an iPad2 that costs the same as an iPad 1 that is twice as powerful. You have to look at the prices of all things."
Well, all things except food and energy, if you're the Fed.
According to the Journal, amidst laughter over Dudley's remarks, someone in the audience replied,
"I can't eat an iPad."
While another shouted,
"When was the last time, sir, that you went grocery shopping?"
In yesterday's post regarding inflation, I noted that not everyone ascribes all price movements to inflation or, for that matter, deflation. Those terms are reserved for monetary creation in excess of, or less than, the growth of an economy.
Just because prices rise, or fall, doesn't mean they are due to (monetary) inflation.
It's pretty distressing that the New York Fed's President can't distinguish between prices which fall due to improved productivity or value-added, prices which rise due to demand, and price moves resulting from reactions to excessive money creation.
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