Thursday, December 26, 2013

Weisenthal: It Looks Like Serious Price Inflation Will Be Back in 2014

There is no indication that Business Insider's Joe Weisenthal understands the connection between price inflation and Fed money printing, but to his credit, he is watching the data, sees the price inflation developing and is willing to write about it. He says:
[T]he idea that the pre-crisis "Great Moderation" would be permanent proved to be a sham, so too will (eventually) the current "New Normal" with its perpetual lack of upward pressure on prices.

Indeed, there are signs that the story is changing.
He then prints a series of charts, with comments, that show why the possibility of climbing price inflation concerns him:
Owners' equivalent rent — which is how housing costs are imputed into the CPI — is showing signs of lifting off.

The year-over-year growth in Average Hourly Wages are on a clear uptrend, even if each month is noisy.

Meanwhile, headline measures of inflation lately have been dragged down by factors that don't seem likely to persist.

The year-over-year rate of growth in medical inflation has plunged lately, and the widespread belief is that this is likely to bounce back up at least a bit.

[F]or the first time since the crisis ended, households are actually taking on more credit overall.

Weisenthal then writes:
So it seems likely that inflation — something just hasn't been an issue at all in recent years — is going to be at least somewhere on our radar again.
So it seems that Weisenthal gets it from an observational point of view, but he doesn't get the dangers of climbing price inflation from a theoretical point of view. He amazingly concludes with this:
Now what's crucial to understand here is that [inflation's] not a bad thing. The inflation doomers we talked about earlier were talking about inflation as this evil that will destroy the economy. In fact, it's a sign of the economy returning to health, and it's a signal for companies that they ought to invest. And it hopefully means a reversal of fortune for workers who have been stuck with no wage growth for awhile.
Note: A sign of a healthy economy is not one where prices are climbing. A healthy economy where central bankers are not printing money and almost all prices are falling, in the manner we see them following now in only sectors of high technological advances and little regulation, such as the cell phone, big screen television, laptop computer, and computer tablet sectors.


  1. What reality are these folks living in?

    For one, inflation isn't returning. I just saw food prices jump dollars not cents without my paycheck doing the same. I always thought that a healthy economy 1. is one where I can choose what to buy and how to buy and 2. how much purchasing power people have - not based on any notes, specifically, state regulated but on people's ability to exchange in reference to #1. In fact, can somebody ask these goofballs how much purchasing power we have with the fiat in comparison to other countries, say China or one of the upcoming African countries?

    These guys are jerks. They say "oh, yeah inflation is great" - yeah, for them. All the while the poor and the the workers who helped pay for their cities (D.C. to Boston) (refer to Wenzel's post of richest cities) see their wealth and ability to live as needed decrease. The MSMers live off the wealth of others, then when the tax payers (Tea Partiers) cry foul, the media elites, who have an IQ of a doorknob, lie and slander the very people that labor and have their pay stolen to benefit folks in the elite media, giving them a cocktail lifestyle.

    - JS

    1. You’re too generous. They’re way beyond “jerk”.

    2. I'm trying to cutback my cursing for 2014. I'm just getting an early start.
      - JS

  2. "And it hopefully means a reversal of fortune for workers who have been stuck with no wage growth for awhile."

    How does an intelligent person twist their mind into believing this contradiction? The "hopefully" shows his apprehension. Remove it and see how it sounds.

  3. I removed Business insider from my favorites because of Weisenshill. He is worthless, but typical of financial spew people.