The unabated talk of “lowflation” in the Euro-zone and elsewhere begs the question as to whether ivory tower thinking has completely divorced itself from economic reality. Central Bankers (the ultimate ivory tower residents) would have you believe that the severe decline in oil prices we have seen over the past several months will lead to knock-on effects in the prices of all other goods and services. Perhaps one should point out that in reality, this very rarely happens. The prices of services and goods, where pricing power was established given the relatively high price of crude will not simply evaporate due to falling crude prices as these prices are often quite sticky. Does anyone really think that airlines are contemplating price rollbacks, even though jet fuel(their biggest cost component)has fallen 30%. In a dynamic, developed economy the prices of some things go up and the prices of some things go down. Does a hedonically adjusted price gauge like the CPI realistically reflect the overall price level for a $14 Trillion economy, and will a continuation of the “what me worry” interest rate policies of the Fed have any immediate affect on said gauge. In Jim Grants new Book “The Forgotten Depression” the author points out that the Federal Reserve did almost nothing in the way of micro-management, even in the face of a depression the likes of which we have never seen. However, what was interesting was that the micro-management came on the Federal side with various government departments attempting to shape the price trajectory (both up and down) of things such as steel, cotton, wheat, etc.. Perhaps, at some point, Janet will take a page from this historical playbook and the next iteration of QE will involve a Fed purchase of the entire SPR.