The Big Inflation Scare(Paul Krugman)

[billyoc]

Suddenly it seems as if everyone is talking about inflation. Stern opinion pieces warn that hyperinflation is just around the corner. And markets may be heeding these warnings: Interest rates on long-term government bonds are up, with fear of future inflation one possible reason for the interest-rate spike.

But does the big inflation scare make any sense? Basically, no — with one caveat I’ll get to later. And I suspect that the scare is at least partly about politics rather than economics.

First things first. It’s important to realize that there’s no hint of inflationary pressures in the economy right now. Consumer prices are lower now than they were a year ago, and wage increases have stalled in the face of high unemployment. Deflation, not inflation, is the clear and present danger.

So if prices aren’t rising, why the inflation worries? Some claim that the Federal Reserve is printing lots of money, which must be inflationary, while others claim that budget deficits will eventually force the U.S. government to inflate away its debt.

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http://www.nytimes.com/2009/05/29/opinion/29krugman.html?_r=1&partner=rssnyt&emc=rss

[pnwmom]

1. This is important. Recommended. Thanks!

[Clio the Leo]

2. Exactly, as I was telling a co-worker a bit ago....

... about how some of the merchandise we sell was being priced LOWER and why that was not a good thing for the economy as a whole. I'm not an economist, but I am a commissioned saleswoman and even someone as dumb as I am is smart enough to know that if the average price of something goes down, it's going to affect my paycheck.