Inflation Is Dead. Long Live Inflation. Or Deflation

Last week’s inflation numbers sparked a series of posts and articles commenting on the matter with the proclamation that inflation is nowhere in sight:

While these two articles seem to share similar premises, the tone between the two are stark in contrast. The Journal’s piece puts low inflation numbers (ex-food & energy) in the context of a benign recovery. Perhaps the Dow Jones division of Fox Corp decided to push a happy view of the economy since I noticed the following article in the current Barron’s:

Written by the ever-disposable Gene Epstein, I’m not sure the cover article is worth reading.

As long-time readers know, I usually refrain from placing bets on macro-economic calls and am not necessarily disputing these assertions that inflation is not a concern at the moment. But what I do have a problem with is the reasoning behind some of these articles.

The tone set by the WSJ article suggests benign inflation amidst a sustainable economic recovery — yet another variation of the  Goldilocks not-too-hot-or-cold theme. Mish Shedlock doesn’t see inflation either but attributes its absence to hiding-in-plain-sight deflation — a nastier beast than the pleasant affair suggested by the Dow Jones news crew.

I don’t know whether the dice will turn up inflation or deflation. But after a massive credit crisis followed by unprecedented monetary intervention, the one outcome I would definitely short is a happy ending.

More on this topic (What's this?)
Are We Really Headed for Deflation?
Gold – Coming Super Bubble
Read more on Inflation, Deflation at Wikinvest

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