Greg Ip: You are leading us astray!
Here is an opportunity for traders and investors. There is a disparity between the simple summary in the trading world, and the reality for those willing to spend a few minutes actually doing some reading. It is time well spent.
Greg Ip provides the authoritative insight about the Fed for readers of the Wall Street Journal and those watching him on their partner, CNBC. While Greg is a journalist, not an economist or specialist in research methods, he is an astute observer and reporter of the economic scene.
In today’s Wall Street Journal he reported on yesterday’s speech by one Fed President, Richard W. Fisher of the Dallas Federal Reserve Bank. Here is what President Fisher says about his own qualifications:
First, the thoughts I am about to share with you are my own and not those of any other Federal Reserve official or of the Federal Open Market Committee. Second, I am not a trained economist
and make no pretense whatsoever of being a formal practitioner of the dismal science. To me, "dismal" is a misnomer; economics is a vibrant and exciting field of study, especially in a capitalist society where it best applies itself to the conundrums of capital markets and the intricacies of monetary policy.
Fair enough! He goes on to say that the PCE data used, before he was on the FOMC, led the membership then to fight the risk of deflation. When later and better data were available, it became clear that the PCE inflation rate was higher; the risk of global deflation was lower. No doubt this would have been useful information had it been available at the time.
But it was not!
Fisher’s speech laments the fact that policymakers generally do not have the best data at the time they make decisions. This is excatly what we have been trying to explain to our readers.
I am sure that Greg Ip did not intend this, but his article is now circulating in the blogosphere in the form of "the Fed says" instead of an individual member, and "bad data" instead of the best data available at the time.
More particularly, anyone who disagrees with methods for calculating inflation cites this article, even though the PCE calcualtion and benchmarking issues have nothing to do with their particular criticisms.
In short, this article is seized upon as evidence by all of those who prefer to use anecdotal evidence instead of data. If government data is no good, anyone’s story is as good as another’s.