Inflation is now low in every industrial country, and the combination of high unemployment and slow GDP growth removes the usual sources of upward pressure on prices. Nevertheless, financial investors are increasingly worried that inflation will eventually begin to rise, owing to the large expansion of commercial bank reserves engineered by the United States Federal Reserve and the European Central Bank (ECB). Some investors, at least, remember that rising inflation typically follows monetary expansion, and they fear that this time will be no different.
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August 30, 2012
Comments
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And do we see any sign of these 'financial investors' putting any money where their mouths are? E.g. by buying TRIPS? No we do not. None at all. Zero. Zilch.
Sheesh. This is not even complicated.
Posted by: Keynesian | August 30, 2012 at 06:15 PM
Last year I bought a pair of tires for my car. $203.17.
This year i bought another pair of identical tires: $224.04.
But Bernanke says that there is no inflation.
Posted by: Terry | August 31, 2012 at 01:00 AM
Maybe you should shop around more?
More seriously, it's true that there are some issues about how we calculate the CPI. (These are designed to keep down social security COLA payments.) But given that house prices and interest rates are tanking, it would not be surprising to learn that there's room for some consumer products to go up and still have the overall inflation rate be pretty flat. I have not seen ANY credible national statistic suggesting inflation is out of the low band, and I dare you to find one. All statistics suggest that the annualized rate of inflation is going down.
The annualized rates for the first 7 months of 2012 were: 2.9 2.9 2.7 2.3 1.7 1.7 1.4. That is a pretty clear trend. And it does not support Feldstein's rather silly comments at all.
Posted by: Keynesian | August 31, 2012 at 03:17 PM
Recent sales of farm land in the mid-west show increasingly higher prices. How does $15-20K an acre sound? This is, of course, the high end, but is easily double previous prices. All in the last 3 years.
Posted by: Jim M | August 31, 2012 at 09:23 PM
Ignore the price of gold. It means nothing.
Posted by: Jonathan | September 02, 2012 at 07:14 PM