The Inflation Scare Doesn’t Match Reality
The 2021 Inflation Scare is another in a series of false alarms going back several decades. It may not quite qualify as Fake News, but it is close.
Start with this Plain Fact: Inflation has disappeared from the U.S. economy. The Core Consumer Price Index has not exceeded 3% since 1995.
No American consumer under the age of 50 or so has ever had to make an adult economic decision in the context of significant inflation. (At my university, it is a struggle to get students to imagine what inflation would feel like. It’s like asking them to conceive of a world where their phones would have to be permanently tethered to the wall by a cord!)
Another Fact: There is no sign that Inflation is coming back:
“Inflation is near a decade low and well below the 2% level the Federal Reserve targets as ideal. The usual conditions for rising inflation—tight job markets and public expectations of rising prices—are glaringly absent.” – The Wall Street Journal (March 1)
Nevertheless, much of the media still spins the story in the traditional way. Including the WSJ editorial page. To support their recent claim that inflation has already “arrived,” the Journal cited what they called a “pop” in Treasury bond yields. This frightful “pop” amounted to 4 basis points. 4 one-hundredths of a percent. (Since that financial amber-alert, Treasury Yields have actual fallen by more than twice that.)
The media’s inflation alarm is like that smoke detector that goes off every time you burn the toast. Every time the bond market hiccups, or the price of crude oil jumps, or there is a lunar eclipse, there are frantic headlines:
2009: “Inflation Scare: Crazy but Real” - American Enterprise Institute
2010: “My Inflation Nightmare: Am I crazy, or is the commentariat ignoring our biggest economic threat?” - Michael Kinsley, The Atlantic Monthly
2011: “Inflation: A high price to pay: Surge in cost of food and other products fuels fears of a re-run of 2008” - The Financial Times
2016: “Inflation will be the biggest economic story in 2016… Inflation is coming down the pike whether the markets believe it or not.” – Business Insider
2017: “Gold Won’t Protect You From Hyperinflation” - Barron’s
2018: “Investors are bracing for a period of consistently higher inflation” – The Wall Street Journal
2020: “The Coronavirus Economy Will Bring Inflation” - National Review
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