Jim Hamilton is worried about a broad based inflation (see chart), “If it were just a few commodities moving, I wouldn’t be concerned, as any of these prices can be quite sensitive to small disruptions in supply. But we are clearly looking at an aggregate phenomenon here, and it seems unreasonable to suppose that the phenomenon has nothing to do with choices by the Fed”.

He is also suspicious about the effectiveness of the Fed’s rate cuts, “In my opinion, there is no such ideal target rate, and the notion that we can address the difficulties with a sagely chosen combination of monetary and fiscal stimulus and regulatory workout is in my mind doing more harm than good.”

Finally, he hopes Bernanke has “checked out the net that’s supposed to catch him if he falls”.

(click to enlarge, each price was normalized at 100 for January 1)