Is Fed Tightening The Real Reason Inflation Has Dropped So Sharply? No, And Yet . . . January 30, 2024January 29, 2024 Paul London in The Hill: Articles about the economy in recent months often praise the Federal Reserve’s success in taming inflation . . . [and] inflation has indeed come down from a peak of roughly 9 percent in mid-2022 to 3 percent or even less in January 2024. More price reductions are predicted by economists for what such predictions are worth. The important point, however, is that the recent moderation in prices is the result of causes that have little to do with the Fed or its policies, and emphasis on the Fed role lets the real culprits for inflation get away with it. What has happened is that the main causes of price increases in 2022 and early 2023 have been reduced or eliminated. COVID-related shortages of computer chips, new and used cars and the like are no longer raising prices. Ships aren’t lined up to be unloaded at ports. Truck drivers are back on the road and domestic trucking services are less expensive. Gasoline prices have come back to levels of a few years ago. Falling prices for the last several months are basically the result of supply catching up after Covid interruptions. Once-overwhelmed supply chains have filled up and returned to normal. Energy and especially gasoline prices have fallen back, reducing the price of many other goods and services. U.S. oil, natural gas and green energy production has surged. Markets seem to have adjusted to the Ukraine War and to Russian, Saudi and Iranian efforts to raise prices. There is still upward pressure on prices as wholesalers and retailers of goods and services try to “pass through” earlier increases, but not all of these efforts will succeed. In short, improvements on the supply side are what is moderating inflation. . . . Government and private sector actions to deal with the COVID crisis, reopen supply chains, expand energy production, and invest in infrastructure get short shrift when in fact they have done far more to fight inflation than Fed monetary policy. That said, as I learned from interviewing Fed Chair Paul Volcker 40+ years ago, inflation has perhaps as much to do with psychology as economics or monetary policy. If the Fed hadn’t been perceived as willing to do “whatever it takes” to defeat inflation, inflationary expectations might have been higher. And inflationary expectations can be self-fulfilling. PRKR Some encouraging news. In November, with the stock around 8 cents, I lamented: ParkerVision made its appeal yesterday. You can read about it here and, in more detail, here. Lord knows I’m gun-shy by now; but if you own PRKR (with money, in this case, you basically have already lost) — currently valued at barely $7 million — I would hold on to see what happens. Who knows? The good guys might finally win. I would say the same here at 17 cents.