Inflation, deflation, and disinflation are all in the eyes of the beholder, and all depend on the definition. Still I expect another round of deflation possibly with prices but more importantly with credit, my preferred measure of "flation".
When the data says one thing and the symptoms continuously say another, it makes sense to question the reliability of the instruments.Although our government-supplied data suggests we are experiencing low inflation and modest economic growth, the economy shows symptoms of low growth, rising prices, and diminishing purchasing power.
Worried about inflation? Shut up, and learn to love quantitative easing.
I suspect most of you will reply an emphatic yes, but some of you will say no. Before I give you my take, please ponder a similar question: "Is inflation or deflation coming?"
If interest rates rise, as most of the world assumes will happen eventually, then a million dollars instantly becomes a lot less.
"All is well," the public bankers at the central banks around the world are saying to the private bankers on the Wall Streets around the world, even as the central banks distribute their Get-Well-Soon cards disguised as dollars, pounds, francs, lire and renminbi.
So the Fed is printing money, which drives household wealth up, so that the government can raise taxes, so that families spend a little more and save a whole lot less, while wages go down and household debt starts to climb back up. Now all we need for this genius plan to work out is for housing prices and the stock market to continue to climb forever.
In spite of the often-heard mantra that "inflation wipes away debt", I suggest otherwise. Income typically does not keep up with expenses, and most have too few assets to inflate. The poor (last on the credit totem pole) overpay for their assets with cheap credit given to them at precisely the wrong times.
Inflation is expected to run well above the Bank of England target rate of 2% for another two years in the UK. Don't worry it's a self-inflicted goal.
For the past few years, the Fed has maintained that the U.S. inflation rate, which is represented by the Consumer Price Index, or CPI, has hovered around two percent. Most consumers who buy food, goods and services such as health in the real world, will find this figure derisory.
The New York Times mobile app sent me a breaking news update Wednesday morning: "U.S. Economy Unexpectedly Contracted in Fourth Quarter." Based on high government third-quarter spending and government policies and politics occurring during the fourth quarter, the slowdown should come as no surprise.