Challenges for Monetary Policy Part 12 of 14

The brow of a central banker considering further accommodation furrows further when looking at the inflation measures that form the basis for Main Streets inflationary expectationsthe CPI and the Personal Consumption Expenditures (PCE) deflator. On a 12-month basis, the most recent CPI, released yesterday, was running The Forex M.o.d. System – Merchant of Death at a rate of 4.1 percent. The last PCE deflator, released in December, was 3.6 percent. The Trimmed Mean PCE Deflator, which the Dallas Fed tracks in an effort to eliminate noise from signal and as a basis for projecting inflation, is no longer trending downward. Even the so-called Core PCE, which I personally consider least useful because it eliminates food and energy prices, is rising rather than declining.

Of course, what matters most is the future direction of inflation, not the past. In the course of preparing for each FOMC meeting, I regularly consult directly with some 30-plus CEOs to develop a sense of future business activity, including cost and pricing developments. I have found this rigorous exercise to be extremely helpful in placing our staffs econometric analysis in Supreme Trading System context as I have prepared for FOMC meetings in the past, and I will be listening especially carefully to these business operators reports on inflation-related developments as I prepare for upcoming FOMC meetings.

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The Egocentricity of the Present Part 5 of 22

The necessity of risk taking as a pillar of market capitalism has also given rise to agents to service it. Insurers and banks are two such agents, as are investment banks, money managers, hedge funds and other financial intermediaries that provide The Wizard Trader the means to assess, package and distribute risk. In the old days, their job was fairly straightforward. The agents packaged straight-up risk instruments like letters of credit, bankers acceptances, commercial paper, simple loans and stocks, life and property insurance and fixed-rate mortgages. More recently, with the aid of technology and computational power that can assess probabilities at lightning speeds, the menu of risk instruments expanded dramatically. Financial intermediaries began offering exotic products to satisfy almost any risk takers needs anywhere in the world at any time. Hunger for the new risk products Simple Currency Forex Trading was stimulated by a lengthy period of abnormally low interest rates and the normal human instinct to look for ever-higher yields when the returns on orthodox financial instruments, like U.S. Treasuries, municipal bonds or bank CDs, become ho-hum.

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