I was talking about inflation with a friend recently - a subscriber to the highly anticipated Vitus Update.
This person had absorbed a dose of the meme out there, promoted by various cheerleaders of extremity (Beck, etc) that we should run for the hills - the tsunami of inflation is about to bury us all. I emailed to him (my friend, not, yetch, Beck), in part:
Here and Here are two blog posts I did a month plus ago on inflation. The first one has the graph (from Krugman) I was talking about, showing that the current inflation we have in energy and food, is very likely transient. The second (from David Rosenberg) makes the point that core inflation, as operationally used, is, to a large extent, a measure of wage inflation (nb - wage inflation, with respect to the economy as a whole, not wage increases). Krugman is not worried at all about the kind of inflation that is dangerous to the growth of GDP and which erodes the ability of the economy to function well. Rosenberg also is not too concerned about the economy-eroding inflation. However Rosenberg makes the point that the "inflation we have" (energy and food), while not dangerous at this point, is certainly not a good thing. I can find a Krugman quote to that effect if you insist, but his point is that it's short term pain, and milder, and not destructive of society, vs. "core" inflation, which is.I would also make the point that all the deficit hawkdom out there is equally inflation hawkdom, ie, the same people declame against both and see both as analogs of each other, caused by big government run amok. I, myself, long ago and far away, used to think these things because... well, one just knew these things to be true. However, just as noted above, inflation is not inflation, When one delves even somewhat into these issues, one finds that most of what one "just knows" turns out, sadly, to be faith-based, not fact-based.
An overwhelmingly large number of issues struggling through the current cultural slough are faith-based versus fact-based arguments:
- The rationale for a war in Iraq war was a neoconist faith that truth, justice, and the American way would triumph over 2000 years of history. It will be good and it will be easy.
- The credit crisis proceeded from a Randian faith that uber laissez-fair capitalism through magical invisible hands, optimally allocates services and goods so that - most thankfully! - we don't have to worry our pretty little heads about messy regulations and prosecutions. It will be good and it will be easy.
- Climate change: Don't worry, be happy. Sigh.
Conspiracy theories have not served me well over the years. Still, it's hard to ignore the fact that there is actually a lot of evidence that the war on deficits is actually a propaganda campaign by big money to lull the masses into giving more for the cause. Some of the tea party supported congress persons probably actually hold fundamental beliefs that deficits, like dragons, must be slewn, because, well, they are dragons. But Dick Cheney, paragon of the right, probably has a better purchase on the truth than Michelle Bachman. That's the Cheney, you may remember, of the infamous quote: "Reagan proved deficits don't matter"
Inflation- that is, the inflation we have, does not matter either - in the Cheneyian sense.
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