iPad price remark gets Fed's Dudley an earful

NEW YORK Fri Mar 11, 2011 2:34pm EST

William C. Dudley, President and Chief Executive of the Federal Reserve Bank of New York, addresses the Economic Club of New York in New York City April 7, 2010. REUTERS/Mike Segar

William C. Dudley, President and Chief Executive of the Federal Reserve Bank of New York, addresses the Economic Club of New York in New York City April 7, 2010.

Credit: Reuters/Mike Segar

NEW YORK (Reuters) - Memo to central bankers:

Best not to cite the price of the new iPad as an example of why inflation isn't a problem when you head into a working-class neighborhood.

In Queens, New York, on Friday, New York Fed President William Dudley did just that. He got an earful.

After being bombarded with questions about food inflation, Dudley attempted to reassure his audience by putting rising commodity prices into a broader economic context -- but that only made matters worse.

"When was the last time, sir, that you went grocery shopping?" one audience member asked.

Dudley tried to explain how the Fed sees things: Yes, food and energy prices may be rising, but at the same time, other prices are declining.

He then stretched for a real world example. The only problem was he chose the Apple's latest tablet computer that hit stores on Friday, which may be more popular at the New York Fed's headquarters near Wall Street than it is on the gritty streets of Queens.

"Today you can buy an iPad 2 that costs the same as an iPad 1 that is twice as powerful," he said."You have to look at the prices of all things."

This prompted guffaws and widespread murmuring from the audience, with one audience member calling the comment "tone deaf."

"I can't eat an iPad," another said.

Queens is a borough of New York perhaps best known internationally for being home to New York City's two airports, the Mets baseball team and its portrayal in the television program "The King of Queens" -- whose main character delivers packages for a living.

Misjudging your audience is hardly unusual for those in positions of power. In 2007, then-presidential candidate Barack Obama asked an Iowa crowd if they had seen what Whole Foods -- an upscale supermarket more popular in big cities than in the Corn Belt -- charges for arugula.

(Reporting by Kristina Cooke; Editing by Jan Paschal)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (3)
AU79 wrote:
“Let them Eat Cake” probably would have worked well too.

Mar 11, 2011 11:03am EST  --  Report as abuse
vicvega wrote:
IPads are made in china by basically slave labor. They are priced for what the market will bear, not for materials and labor cost. Flat screens have come down too, but everything I need on a daily basis has gone up.

Mar 11, 2011 11:06am EST  --  Report as abuse
meyerhd wrote:
Even worse, the example he used (computing power) is WRONG. His rationale is that a device today with twice the power for the same price is like getting twice as much for the same price. HOWEVER, that conclusion is wrong because the devices of yesteryears are quickly oblsolete. His argument would only be true if your old device just delivered half the performance of the new device, but it most cases, the old device is not compatible or unable to operate new software. Inflation is a measure of the cost of ‘maintaining’ a certain ’standard of living’. When the benchmark or standard (computing power necessary to run current applications) makes a big jump up, it is not deflationary because you do not have the option of just using your old device, you must go buy another one, so the cost of ‘maintaining’ your electronic ’standard of living’ grows at the same rate as innovation, which in today’s cell phone/pad/pc world is about every year. Bottom line: do not use our historic understanding of inflation and pricing (developed when change was much slower) to argue that overall prices are falling today. We’ve just ‘added’ much more of that ’stuff’ into our mix of goods, which represents outlays of real dollars, stuff you didn’t ‘need’ ten years ago, so your cost of ‘maintaining’ your ‘relative standard of living’ (inflation) has risen enormously in the past 15 years.

Funny thing is that consumers sense inflation much more quickly than policy wonks in washington and at the fed because they closely monitor what matters: their pocketbook and their standard of living. Most average americans can tell you if they have more or less wealth than this time last year and whether they are ‘keeping up’ (standard of living). That’s all inflation is supposed to measure. They don’t need some obscure mathematical formula or statistic to tell them if there is inflation, they astutely sense it much sooner than the economists because the economists are using outdated and flawed methodologies. Those economists are too busy ‘massaging’ the calculations and the numbers to paint the picture they want to show Americans.


Mar 16, 2011 7:43am EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.