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Page 8 POST-GAZETTE, AUGUST 2, 2013 WHERE DID INFLATION GO? Shouldn't it be Rising with All this Bond Buying? Consumer inflation just hit a 50-year low. So indicates the Federal Reserve's pre- ferred inflation gauge -- the Personal Con- sumption Expenditures (PCE) price index maintained by the Bureau of Economic Analysis. i Besides tracking consumer inflation, the PCE price index measures household pur- chases, a major factor in GDP growth. The core PCE index does the same thing with- out including volatile food and energy prices. The broad PCE index hit 0.74% in May, with core PCE at 1.05% - a new all-time low, breaking the 1.06% measured in March 1963.1.2 Why isn't QE3 generating more infla- tion? The Fed is still "printing money" to the tune of $85 billion a month, but the head- line PCE index has fallen since last year (it approached 2.0% in early 2012). The Consumer Price Index only advanced 1.1% between May 2012 and May 2013, and that was the smallest annualized gain in the CPI since November 2010; the core CPI only rose 1.7% in that period. TM What is keeping inflation in check? Chalk it up to extraordinary circumstances -- and the perception that they will continue. Short-term interest rates are nil and the Fed has told the world that our benchmark interest rate will be at rock-bottom levels until our jobless rate dips below 6.5% or inflation tops 2.5%. 4 QE1 and QE2 did boost inflation in the short-term; in fact, one of the things that prompted QE2 was the Fed's concern about deflation in 2010. Yet inflation has lessened since QE3 started. 4 Three factors may be encouraging disinflation. One, the Fed has repeatedly emphasized that QE3 will not stoke infla- tion; it has not implied, hinted or commu- nicated that it will let inflation get out of hand or exceed its present 2.0% target. Two, economists, analysts and investors seem to have widespread faith that the Fed can capably fight sudden spikes in the PCE index or the CPI and keep things under control. Three, total government spending (as a per- centage of potential nominal gross domes- tic product) fell about 3% from Q2 2010 to Q1 2013 - and that's not even taking seques- tration into account. That implies reduced demand in the economy. 4 Psychologically, there is little or no fear of runaway inflation and the prevalent expec- tation is that there will be low inflation for some time. This psychology may be influ- encing the current disinflation as well. Also, while the Fed creates money and purchases bonds from banks via its on- going stimulus, the bulk of that money has turned into bank reserves. Lenders are con- servatively sitting on these reserves as they pay interest. Should the Fed boost the in- terest it pays on them, it will give these banks more reason to maintain them. 4 When might inflation expectations change? If the Fed were to raise its infla- tion target, they would change greatly. No one sees that happening anytime soon. Will the Fed taper sooner, or later? With such mild inflation, it might be later. On June 10, Federal Reserve Bank of St. Louis President James Bullard argued for sustain- ing an "aggressive" stimulus given the "sur- prisingly low inflation readings" of recent months, markedly below the central bank's target. 5 "Inflation in the U.S. has surprised to the downside," Bullard commented at the Inter- national Economic Forum of the Americas in Montreal, later adding that "it hasn't moved back at all. I am still waiting for that to happen and I am getting a little bit nervous."5 As former Richmond Fed economist Ward McCarthy noted to BIoomberg, "This is an inopportune time to be talking about curtailing [QE3]. They are missing on the inflation mandate. "5 Joe Vita may be reached at 781-933-6533 ext.2616 or joe.vita@trilogyfs.com. www. trilogyfs, com The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual. Securities and advisory services offered through National Planning Corporation (NPC). Member FINRA, SIPC. A Registered Investment Adviser. Trilogy Financial Services and NPC are separate and unrelated entitles. This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is be- lieved to be from reliable sources; however we make no representation as to its complete- ness or accuracy. Please note -- investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment. Citations. - advisorperspectives.com/dshort/updates/PCE-Price-lndex.php [5/31/13] 2 _ bea.gov/faq/index.cfm?faq_id=518 [6/13/13] 3 _ bls.gov/news.release/cpi.nr0.htm [5/16/13] 4 _ theatlantic.cm/business/archive/23/6/the-biggest-econmic-mystery-of-213-whats-up-with-inflatin/ 276772/ [6/12/13] s _ blmberg.com/news/213-6-1/fed-s-bulard-says-low-inatin-may-warrant-onger-qe.html [6/I0/13] Wheels & Whiskers CAR SHOW The 7 th Annual "Wheels & Whiskers" Ben- efit Car Show promises a full day of family fun on Sunday, August 11 th from 9:00 am to 3:00 pm at Mestek Field, 260 North Elm St. in Westfield, MA. Spectators are welcome to view scores of beautiful cars including classics, antiques, street rods, hot rods and muscle cars. The awards ceremony begins around 2:00 pm. Browse the giant tag sale, taste the food, enjoy the music and try your luck with the Chinese and 50/50 raffles. Fun for the whole family, including the Westfield " : Police Department's Child Safety Identffi- cation Program (10:00 am to 2:00 pm), face painting, children's activities, free kid's raffle and much, much more! Pets are wel- come, but must be leashed and controlled. The Westfield Cruisers present this event annually in memory of Ann Grzebien, who loved animals. Proceeds from this event will benefit the Westfield Homeless Cat Project; donations of canned cat food are appreciated. Free admission for spectators, $I0 donation per show car. In case of rain, a new date will be announced. For further information, please call Gary at  (413) 562-1346 ......... Italy' s Republic Day Celebrated on the South Shore The celebration was spon- sored by the Sons of Italy's Lodge 'John A. Volpe' of Easton, MA and planned by the lodge's President Andre Urdi. It was presented on the local cable television sta- tion #9, Comcast and broad- cast the following Tuesday, May 28 m, Friday, May 31 st and on Sunday, June 2, 2013; respectively at 8:00 pm, 6:00 pm and 8:00 pm. This year's celebration of the event was particularly sig- nificant, for it took place on the same day in 1946 (June 2"d). This 6T h year cel- ebration gave a lot to think about. Most of the present generations were not even born then. The few privileged survivors can relate what occurred. The Italian people went to the polls to express their choices. They had to solve the questions asked by the referendum: Monarchy or Republic, while a second ballot called for the election of the members of the Con- stituent Assembly, which would later produce a Con- stitution for either a Repub- lican Government or a Con- stitutional Monarchy. The result of the voting was: RE- PUBLIC, but not by a large margin. The 'Assembly' had later to decide how to elect a Provisional President, leav- ing the election of the per- manent President to the new, democratic Parliament. The unicameral 'Assembly' be- gan its work in early July, and labored until mid December to complete the Constitution. The Provi- sional President chosen was Enrico De Nicola, a law pro- fessor at the University Federico II of Naples. Presi- dent De Nicola signed the historical document on December 27, 1947. The Constitution became effec- tive a few days later, on January i st, 1948. The first Parliamentary elections were held on Sun- day, April 18, 1980. The uni- versal suffrage was the "new" rule. The election lasted two days. A very high percent- age of voters elected the first Democratic Parliament. A large number of political parties appeared on the bal- lot, each with a particular symbol. The first political leaders, Alcide De Gasperi, Christian Democrat; Palmiro Togliatti, Communist; and Pietro Nenni, Socialist were the major leaders of the pack. A few other parties were able to grab votes and be seated, in a few cases, in the new Parliament, which assembled in PALAZZO MONTECITORIO in Rome. The first order of the day was to elect the first permanent President. The choice fell on Antonio Segni (economist). What is outlined above is but a brief overview of the historical event we were privileged to witness 67 years ago. It would take quite a few pages to detail what transpired during voting, particularly in 1948. The voting, which lasted two days, caused the embarrass- ment of most women and some men, while expressing their vote. The lines outside the voting places were long, but very orderly. As an associate of the Post- Gazette's staff, contributing a special feature, "Italian Trivia," I find it is my duty to express my sincere thanks and gratitude to the editor: Pamela Donnaruma. She was always my guiding light and quite generous to supply me plenty of space in the paper. I am also grateful that my friend, and also Post- Gazette contributor, writer and historian Orazio Buttafuoco was kind enough to offer his expertise and keen observations in outlin- ing some of the details vis- &-vis the events of 1946 and 1948. He also joins me in expressing his own thanks to Pam for her assistance in publishing his features: "The Bilingual Corner" and "News Briefs, from Italy." We trust that the readers of the Post-Gazette will appreciate our efforts to enlighten the people of the South Shore, and also of Weymouth; where professor Orazio produces and broadcasts "Italian News," in Italian, every week, on his own show: PAN- ORAMA ITALO AMERICANO. SONS OF ORSOGNA 8 th Annual Golf Classic The Sons of Orsogna will be holding their 8  Annual Golf Classic on Friday, September 6, 2013 at the Mount Hood Golf Club located at I00 Slayton Road, Melrose, MA. Registration will begin at 12:30 pm, Shotgun at 1:30 pm and a Dinner Banquet at Mount Hood Function Room at 5:00 pm. Registration fee includes green fees for 18 holes, golf cart, dinner, entry into the longest drive competition, 5 closest to the pin, raffles and more. Procceeds to benefit the Sons of Orsogna Scholarship Fund. For more information on this event, please email Nick Scenna at soascholarshipfund@gmail.com. K I  Fully Insured Lic #017936 Nechanical Heating & Air Conditioning Sales, Service & Installation Ken Shallow 617.593.6211 kenskjs@aol.com