On July 29, the U.S. Personal Consumption Expenditures (PCE) price index for June, released by the U.S. Bureau of Economic Analysis, posted the largest 12-month increase since 1982. On the same day, John Cochrane, senior fellow at Stanford University’s Hoover Institution and professor of economics, said the Federal Reserve should raise interest rates above 9% to curb inflation.
The PCE price index rose 4.8% from a year ago
The U.S. economy continues to look bleak with each new economic report and data released to the public: in mid-July, the Bureau of Labor Statistics’ Consumer Price Index (CPI) was released, revealing that the June CPI rose 9.1% year-over-year to a record high; on July 27, the Federal Reserve Board ( Fed raised the Federal Funds rate by 75 basis points (bps) in an effort to curb red-hot inflation.
Two days later, the Bureau of Economic Analysis (BEA) released the much-noted Personal Consumption Expenditure (PCE) dataThe PCE index rose 6.8% in June, the largest 12-month increase since January 1982.
The BEA report detailed that “from the same month a year ago, the PCE price index rose 6.8% in June.” It also noted that “commodity prices rose 10.4%, while service prices rose 4.9%. Food prices rose 11.2% and energy prices 43.5%. Excluding food and energy, the PCE price index was up 4.8% from a year ago,” the government agency’s records note.The BEA is scheduled to release the results of its annual update of the national accounts on September 29.
A Stanford University economics professor believes the gold and bitcoin standards do not work
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The same day, economist John Cochran said in ainterviewwith Kitco’s news desk
that the U.S. central bank should raise interest rates higher than 9%. Cochran further stated that inflation cannot be controlled by gold or bitcoin standards. The Stanford economics professor said that there is a “consensus view” that the Fed should raise interest rates “well above” the 9% level.
“So now that inflation is at 9%, economists are talking about rates of 10%, 11%, 12% to bring (prices) down,” Cochran remarked. This Stanford economist told Kitco News anchor David Lin, “I think the Fed and the market are hoping that a lot of inflation will subside on its own without interest rates going that high.”
Lin also asked Cochrane about a gold standard or bitcoin standard used to control inflation.” Sorry, no,” the economist replied.” Under the gold standard there was a lot of inflation and deflation, up and down by 10% or 20%, but all inflation was followed by deflation. Unfortunately, there is no going back to gold.” Cochran believes the Fed needs to implement tougher fiscal policies to counter inflationary pressures.
As for the bitcoin standard, Cochran said it was a terrible idea and claimed that bitcoin (BTC) is “worthless.” It’s a terrible idea,” Cochran said in an interview with Hayashi.” In terms of financial technology, bitcoin is an attempt to resurrect gold, which is essentially worthless, and people hold on to it only because it is scarce… Bitcoin is also very computationally intensive, making it very unsuitable for trading itself…” Cochran concludes.
The best answer is that our government should start implementing calm fiscal and monetary policies and pay more attention to curbing inflation.
What do you think about the latest PCE data and economist John Cochrane’s opinion? Do you think that improved fiscal and monetary policy will help control inflation in the U.S.? Let us know what you think on this topic in the comments section below.
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