Dr. Duru

Inflation Fears Are Overblown

I agree with Davy J: there is some circular logic in here which locks in a deflationary effect no matter which direction oil prices go.

I also agree with Eric Hart: this piece is very mainstream as far as the pundits, academics, and monetary policymakers go. And I would argue that until oil recently proved it could hold above $110/barrel or so, the vast majority of talk we heard in the media pooh-poohed inflationary threats, mainly because the Fed told us so. One thing we used to hear was that surely oil would go back down to $70, $80, etc...

In the end, it's the expectations that count most. Oil and food inflation are driving expectations for future inflation ever upward. And, eventually, yes, labor will begin protesting for higher wages once it really sinks in that counting on credit cards and home equity will no longer support current living standards. The wage story is probably the last leg of the "inflation is no threat" stool.

Finally, I am curious to find out where that chart came from showing real wage growth? I often here pundits who claim the economy has been and is just fine say that wage growth has been healthy. It never made sense to me, and I have been looking for the real data in a clear and understandable form.