Inflation is negative for the economy. So far the evidence that more is coming is spotty. Some headline prices are rising,but most aren’t. I’f inclined to be watchful and wary. Inflation has to be chocked off before inflation expectation become heavily embeded as they did in the 1970’s.
I know I’m supposed to hang my head in shame at how some of us have been Chicken Littles on price inflation, but I’m still not sure it’s time to throw in the towel. (For the record: Yes I have definitely been wrong in the specific timeframes I gave for when we’d see certain things happening with CPI.)
For example, looking at the latest numbers from the BLS, coming from the Producer Price Index and Consumer Price Index, we get the following 12-month changes:
Consumer goods except food and energy: +1.3%
Consumer goods: +3.2%
Finished goods: +6.8%
Intermediate goods: +9.4%
Crude goods: 23.7%
And in light of all this, I’m supposed to just roll over and say, “Yep there is clearly no sign of price inflation in the system.” ? I don’t mind people saying, “I think this is a one-time blip in commodities that will work its way through the headline numbers,” like so.
But Krugman et al. are going much farther than that, acting as if only Newt Gingrich could be so stupid as to think there is any sign of inflation. Steven Chapman (HT2 David R. Henderson) goes so far as to say, “The last epidemic of inflation, in the 1970s and early ’80s, was a searing experience, from which the Federal Reserve learned lessons it has no desire to repeat. Is inflation coming back? Sure. Right after the Ford Pinto.”
Really? That’s how confident we all are in this guy?
Update on (Price) Inflation
Fri, 13 May 2011 22:00:22 GMT