Maybe an inflation measure that is less comprehensive but better measured isn't such a terrible idea. Maybe the Fed worrying about 1.8% vs. 2% inflation is not such a good idea.
John Cochrane wants a better measure of monetary inflation. I have one. The overnight loan market can bet a fixed 2.5% trend direct inflation. John gets what he wants, a finance market intelligently placing that trend inflation where it is needed (or avoided) the most. Price variation is about 3%, , so we get a 3% swarm of bees Nash chasing a trend.
But it has a finite end and a renewal option, a long enough measures to cover a complete economy. In other words, in our expectations function, we are capturing the low frequency generational element, making it more accurate. The renewal hedge smooths our fixed sample rate, the residual requirement from'right to coin', the unavoidable boundary.
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