On July 29, the U.S. Bureau of Economic Analysis reported on
America’s personal consumption expenditures (PCE) price index for the
month of June, and the figure saw the largest 12-month increase since
1982. On the same day, Stanford University’s senior fellow at the Hoover
Institution and professor of economics, John Cochrane, said the Federal
Reserve should increase rates above 9% to tame inflation.
PCE Price Index Increased 4.8 Percent From One Year Ago
The U.S. economy continues to look gloomy every time a new economic
report or data is released to the general public. In mid-July, the
Bureau of Labor Statistics Consumer Price Index (CPI) report
was published, and it revealed June’s CPI data reflected a record peak
9.1% year-over-year increase. On July 27, the U.S. Federal Reserve hiked the federal funds rate by 75 basis points (bps) in order to help curb the red hot inflation.
Two days later, the Bureau of Economic Analysis (BEA) released the closely watched personal consumption expenditures index data
otherwise known as PCE. The PCE index saw the largest 12-month jump
rising 6.8% in June, an increase that hasn’t been recorded since January
1982.
“From the same month one year ago, the PCE price index for June
increased 6.8 percent,” the BEA report details. “Prices for goods
increased 10.4 percent and prices for services increased 4.9 percent.
Food prices increased 11.2 percent and energy prices increased 43.5
percent. Excluding food and energy, the PCE price index increased 4.8
percent from one year ago,” the government entity’s records note. The
BEA plans to release results from the National Economic Accounts annual
update on September 29.
Professor of Economics at Stanford University Thinks a Gold or Bitcoin Standard Won’t Work
On the same day, the economist John Cochrane did an interview
with Kitco’s newsdesk and said the U.S. central bank should bump
interest rates higher than 9%. Cochrane further remarked that a gold or
bitcoin standard would not be able to control inflation. The professor
of economics at Stanford University said that the “consensus view” was
that the Fed should hike rates “substantially above” the 9% region.
“That means, right now with 9 percent inflation, economists are
talking about 10, 11, or 12 percent interest rates to bring [prices]
down,” Cochrane remarked. “I think the Fed and markets are counting on a
lot of inflation going away on its own without interest rates having to
go quite that high,” the Stanford economist told Kitco News anchor
David Lin.
Lin also asked Cochrane about a gold standard or a bitcoin standard
used to control inflation. “Sorry, no,” the economist replied. “Under
the gold standard, there was a lot of inflation and deflation. 10 or 20
percent ups and downs of inflation and deflation, but every inflation
was then matched by a deflation. I’m sorry, we’re not going back to
gold.” Cochrane believes the Fed needs to implement tighter fiscal
policy in order to combat inflationary pressures.
As far as a bitcoin standard, Cochrane said it was an awful idea and insisted bitcoin (BTC)
is “worthless.” “That’s a terrible idea,” Cochrane said in his
interview with Lin. “In terms of financial technology, Bitcoin is an
attempt to revive gold, something intrinsically worthless that people
only hold onto because it’s rare… Bitcoin is also very poor for making
transactions itself, since it’s so computationally intensive.” Cochrane
concluded:
The best answer is our governments should start running
sober fiscal and monetary policies, and pay more attention to keep
inflation under control.
