Is Inflation “Transient”?

10 Sep

Is Inflation “Transient”?

Even Establishment Figures Aren’t Buying It!

Producer prices in the month of July rose 0.7 percent.  Over the past 12 months, producer price have risen 8.3 percent. 

The Federal Reserve’s insistence that the inflation we are experiencing is merely transient is cracking up on the reefs of widespread disbelief. 

Even leading establishment economists find it hard to believe. 

We might ask how inflation can be transient when the Fed is still printing $120 billion a month.  A long time ago Nobel prize-winning economist Milton Friedman pointed out that there was a lag, perhaps 12 – 18 months, between when the new money enters the economy and when it shows up in consumer prices.

So, today’s higher consumer prices were created a long-time ago, just as we will be experiencing the effects of today’s money printing in higher prices way down the road.

That hardly sounds like today’s inflation is transient. 

But even leading establishment figures are having a hard time buying the Fed’s party line.  Most were initially silent, but some are now starting to speak up.

There are few more establishment figures than Larry Summers.  He is a former World Bank and US Treasury official and senior economic advisor in the Obama administration. 

Summers recently tweeted this: “Every time you hear that inflation is transitory remember that double house price inflation hasn’t yet shown up in the indexes. Housing represents 40 percent of the core CPI.”

Translation:  Home and rental prices are about to drive consumer inflation numbers even higher.

Then there is Ken Rogoff.  He’s a former IMF and Fed economist, now at Harvard.  He has been pointing to the “unsettling parallels,” with the “perfect storm” that produced the high inflation of the 1970s and today’s conditions.

And Niall Ferguson.  His resume includes the Hoover Institution at Stanford University, Harvard, and the London School of Economics.   Ferguson says, ““How long is transitory…?  My sense is that we are not heading for the 1970s, but we could be rerunning the late 1960s, when famously the Fed chair then, McChesney Martin, lost control of inflation expectations.”

In short, whatever the Fed is selling, they aren’t buying any.  And neither should you!