What to Read on Inflation

Commodity Rout Lends Credence to Bernanke’s Inflation Outlook — Michael S. Derby

Worries the U.S. recovery may not be as strong as expected signaled to many investors it was time to re-price oil for lower demand, and other commodities followed suit.

All in all, it looks as if Bernanke’s oft-repeated view that the commodities surge, driven by supply shocks, political forces and overseas growth, may indeed be “transitory.”

A Commodity Peak? — Paul Krugman

But why, exactly, is this such a surprise?

Some of this probably represents a long-term upward trend, as emerging economies place pressure on limited resources, but even so, you wouldn’t expect continued rapid rises, and in fact you should expect some regression toward normal levels as supplies and to some extent demand respond.

Resources, Inflation, and Monetary Policy — Paul Krugman

Well, the San Francisco Fed tells us that commodities account for only about 5 percent of personal consumption…

Visualizing Priorities — Paul Krugman

A naive observer might note that interest rates are low by historical standards, making you wonder why we’re obsessing about the bond market; that inflation is also low by historical standards, making you wonder why it’s an issue at all; and that unemployment is immensely high. But Washington has its priorities.

More Fun with Prices — Paul Krugman

Runaway inflation! Or, maybe, not.

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I Hate Being Right

No, seriously. Because it’s always about bad things.

Me, back in early December:

Hence “QE2,” shorthand for the second round of quantitative easing. By buying long-term bonds, Bernanke hopes to push down long-term interest rates. Low rates encourage borrowing, which increases spending — and prices.

The problem with QE2 isn’t that we’re printing too much money. It’s where that money will go. It should go to workers, who will spend it and stimulate the economy. But it won’t.

The New York Times, today, summarizing the economic consensus:

The Federal Reserve’s experimental effort to spur a recovery by purchasing vast quantities of federal debt has pumped up the stock market, reduced the cost of American exports and allowed companies to borrow money at lower interest rates.
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But most Americans are not feeling the difference…   Continue reading “I Hate Being Right”

Quote of the Day: Felix Salmon

My feeling about an inflation target is that its mere existence is not going to convince anybody that inflation is on the way. So unless and until the Fed can credibly explain how it’s going to create 3% inflation, it shouldn’t even think about unveiling a target. And if it can credibly explain how it’s going to create 3% inflation, then it doesn’t need the target at all.

— Felix Salmon (Reuters)

It’s the Same Old Song…and It Sucks.

First, an apology: I’m not very good at this whole blogging thing. I’m the kind of writer who likes to go into a cocoon for several days and reappear with a finished work. I get absorbed in my work, and it’s hard to force myself to post something everyday. Some writers find it easier to pour out their thoughts in-the-moment and collect it all into a coherent work later. So I’m back, but no promises about how long it’ll last.

Second, an observation: In the time I’ve been avoiding this blog and the news, nothing has changed. Legislators and economists are still arguing over fiscal stimulus, the financial regulation bill looks pretty much the same as it did a month ago (or two months ago, for that matter), investors are still worried about European debt, and Afghanistan is still a complete mess. I used to think the world would pass me by if I stopped paying attention for a few weeks, but I’ve come to realize that real change is rare—and the bulk of what we spend our time worrying about is the same things over and over.   Continue reading “It’s the Same Old Song…and It Sucks.”