Monday, February 25, 2008

Inflation

I have been talking about inflation since January 10th.

Now, other people are starting to get clued in.

Despite a very clear set of data that show a sharp acceleration in inflationary pressures, there is a rampant denial that these pressures are worth worrying about.

Meanwhile, the Federal Reserve has joined the ranks of those unconcerned about inflation.

This was one of the key ingredients of bad policy in the 1970s - denial that there was a problem. But it can't last forever. Eventually, inflation won't be ignored and that time seems to be getting closer and closer.

That closer and closer will be June-Sept. of this year. I don't have a PhD in economics, but to quote Greg Mankiw quoting Brian Hollar:
"...nearly everything you ultimately use in economics, you learn in Mankiw." [The intro textbook]

Sometimes quant-whiz econ PhD get lost in the trees of the data and forget that there is a forest out there. Strong winds of inflation are blowing through that forest. Look up from your green eyeshades every once and a while. You are sending us into stagflation.

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