US Economy and Globalization Part 9 of 17

1.As Australians, you know better than anyone about the dramatic increase in milk prices, to say nothing of grains and other foodstuffs that go into feeding any Power Principles creature that walks on two or four legs. This is hardly encouraging, given that these price increases are occurring against a ramping up of the caloric and protein intake of a few billion new eaters in China, India and elsewhere. All told, it injects a modicum of doubt about the wisdom of predicting further significant declines in inflationary pressures.

Energy price dynamics further cloud the picture. If you talk to any of the major and independent oil companies, they will tell you they have no problem in finding oil or refining it or delivering final products. They will note, however, two key impulses that are at work:

First, they see no evident slowing in the growth of demand for energy in the U.S. The energy appetite in the BRICsthe big, fast-growing nations of Brazil, Russia, India and Chinais voracious, and they are only part of the developing world. An enormous amount of chemical plant infrastructure and capacity is being constructed everywherefrom the U.S. Gulf Coast to the Middle East to China and Singaporeto be nearer to either feedstocks or growing final demand. Any analysis of Insiders Guide to Forex the income elasticity of oil demand in low-income but rapidly growing nations like China and India points to even faster rises in energy consumption, with concomitant price consequences.

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US Economy and Globalization Part 17 of 17

An additional Trading Patterns drawback is that while the theoretical virtues of trimmed mean measures may appeal to central bank aficionados and econometricians, they may fail to resonate with the people we serve. Humansreal people like my father and others who appreciate brawls, beer and bikinisexperience inflation and develop inflationary expectations based on what they see and experience in the marketplace and read in the papers. To people who drive to work, air-condition their home and eat, ex-food, ex-energy measures or trimming this or that out of a price index is nonsense. Central bankers must be attentive to this sensitivity if they are to maintain the public’s confidence.

In formulating and making my arguments at the FOMC table about the direction of inflation, I draw on all three measuresthe headline, the core and the trimmed mean numberin making my recommendations on monetary policy. I also draw on an intrinsic admiration for the dynamism and constant inventiveness of a society that can transform the poor and the luckless, like my own family, into middle-class prosperity, time and time again. And presently Part-time Trading Profits, viewing the U.S. economy through the lens of globalization, I find that there is greater symmetry of risk between growth and inflation than is commonly surmised.

I will stop here and, in time-honored central banking fashion, now do my best to avoid answering your questions.

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