Now here's the scary part: Even though more than half of all American households now own equities directly or through mutual funds, an increase in equity prices does not figure into the Fed's calculation of inflation. So while measures of core inflation (which exclude food and energy) carefully register minute gains in the price of a fixed basket of goods and services meant to reflect what a typical family buys to achieve a minimum standard of living, they ignore massive price surges in what has effectively become a widely held consumer good: stocks.

Moreover, the Fed's inflation-targeting approach overlooks price increases for real estate and rising commodity prices. Don't even mention gold, which has gone from $707 to $1,114 since a year ago.

Even if the Fed seems blithely unaware of the havoc it may be wreaking through its irrationally loose monetary policy, in tandem with the distortions of moral hazard inflicted by intrusive government, Americans seem willing to accept the insanity of boom-and-bust cycles. Sure, we could be facing the latest Fed-induced bubble—but so what?

We need the eggs.

Read it all.

Filed under: * Economics, Politics • Economy • The Credit Freeze Crisis of Fall 2008/The Recession of 2007-- • The U.S. Government • Federal Reserve

1. Br_er Rabbit wrote: Shelton is an economist? Most anyone knows that a spike in the price of gold is a mark of deflation, not inflation. Loose monetary policy + “moral hazard” = random incoherent ramblings. November 12, 5:12 pm | [comment link]

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