Hoffmeister Graphs
Jude Wanniski
April 22, 2005


From: Ben.S.Bernanke@***.gov
Subject: Re: Hoffmeister Graphs
To: Jude Wanniski <jwanniski@polyconomics.com >


Thanks.  Graph #1 was the one I was referring to.  The other two are interesting as well.   Ben

 From: Jude Wanniski   <jwanniski@polyconomics.com>
To:  Ben.Bernanke@* * * * .gov
Subject : Hoffmeister Graphs 
04/22/2005 05:18   

Ben... Here are the graphs. If you have an assistant PhD economist at the Fed who you believe is up to the task, I'd suggest you pass this on to him if you really can't work on it. When you get to the CEA, there is a staffer who is in our groove and will be able to work on this kind of thing. But Hoffmeister, not yet 30 years old, is a true whiz kid. In mathematics, economics and music, Mundell once told me, genius shows up before age 30, or almost never.

From: "Paul Hoffmeister" <phoffmeister@polyconomics.com>
To: "Jude Wanniski" <jwanniski@polyconomics.com>
Subject: Bernanke Graphs
Date: Fri, 22 Apr 2005 16:08:51 -0400


In this email, I'm sending you charts specifically related to Bernanke's request that you examine the relationship between the funds rate and inflation after 1960.

Attached are 3 graphs:

1)  Funds Rate v. CPI-Measured Annual Inflation Rate:  From my point of view, this graph seems to imply that the funds rate precedes movements in CPI.  But then wouldn't an increase in the funds rate cause a rise in the CPI?????

2)  Gold's Implied Annual Inflation Rate v. CPI-Measured Annual Inflation Rate:  This graph shows how gold's implied inflation rate precedes movements in CPI, illustrating that gold is a better real-time measure.

3)  Funds Rate v. Gold's Implied Annual Inflation Rate:  This graph seems to illustrate that gold's movements precede the funds rate.  (Does the Fed play catch up with its interest rate moves?  If that's the case, then it means that the Fed is trying to act as a substitute to the marketplace before 1971, which naturally determined this rate.  Which would then imply that the Fed is not doing its real job of mopping up excess liquidity or adding necessary liquidity by managing its balance sheet.)


(See attached file: Jude - Bernanke Graphs 4-22-05.xls)