Sorry Inflationistas, But This Chart Proves You Were Wrong
It’s Friday. And you know what that means in the Wall Street Daily Nation. It’s time for our weekly dose of graphics to drive home a point or two.
This go-round, I’m taking aim at the Inflationistas.
You know, those fear mongers that have been trying to tell us the end is nigh ever since the Fed embarked on its massive money-printing campaign. That prices for all sorts of goods and services – and interest rates – are about to skyrocket. And that our only salvation is not God, but the almighty gold bullion.
Can you tell I was never afraid of their prophetic declarations? Well, that’s beside the point.
What matters is that inflation – and certainly hyperinflation – has proved to be nothing more than a bogeyman.
And the charts I’ve selected for this week should serve as a nice piece of humble pie for all those Inflationistas. The question is, will they eat it?
Show Me, Don’t Tell Me
Take a trip down memory lane with me and you’ll recall a time not long ago – back in late 2009 – when the biggest story in the market was inflation. Almost every last soul was convinced we were on a crash course with higher prices and interest rates.
Warren Buffett… Jim Rogers… Alan Greenspan… they were all jumping on the inflation bandwagon, too. A pundit on Fox News went as far as declaring he was “100% sure” inflation is going to hit. And not just inflation… but hyperinflation.
And why not? Never in the history of the world had the Fed pumped so much extra liquidity into the market. When that happens, inflation always follows, right?
Well, not exactly.
As this chart demonstrates, inflation has proved to be no big deal. We’re not even close to matching any of the major historical spikes.
So what happened?
As I pointed out in a special webinar in 2009, everybody was ignoring the deflationary forces at work – like the collapse in housing, the contraction in personal credit and soaring unemployment. And that these forces were more than enough to offset the Fed’s inflationary actions.
Of course, the die-hard Inflationistas in the group have a knee-jerk retort. It’s a little ditty that goes something like, “Wait for it, wait for it, wait for it.”
I’ll keep waiting. Because in order to have inflation we need a wage-price spiral, wherein wages chase prices and prices chase wages. But that’s not possible when wages aren’t rising.
And they’re certainly not.
Bottom line: Runaway inflation is going to be like Lindsay Lohan at her court-appointed community service – a no-show. So don’t let the Inflationistas scare you. They’re wrong!
That’s it for this week. Before you sign off, let us know what you think about this weekly column – or any of our recent work at Wall Street Daily – by sending an email to: feedback@wallstreetdaily.com or by leaving a comment below.
Thanks and enjoy the weekend!
Ahead of the tape,
Louis Basenese
Related Topics: Economy and Politics, Market Analysis, Think Contrarian, Wall Street Myth Busting
Direct monetization of debt only really got rolling last year. These things don’t happen overnight.
Look at M2, or Austrian TMS over the last 6 months! If/when more gas is poured on the fire (QE3,4,5,6,7) or lending & money velocity pick up … That’s when it’ll really hit home.
BTW – you should look into hedonic adjustments and other manipulations made to CPI today (wasn’t always so, which makes those charts questionable at best).
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What the author has failed to mention is that inflation and deflation are not two forces that offset one another 1 to 1 which leads to a very interesting situation in which deflation and inflation take place at the same time.For example you can have a deflationary collapse in credit and real estate but inflationary explosion in commodities and precious metals simultaneously.Eventually what matters to an average consumer is their cost of living , not what happens to the credit markets.If you have got a collapse in the credit markets but at the same time oil prices rise by 100% then the consumer is gonna have a problem.Of course the government will be explaining to all consumers that this does not matter because prices for other things are falling and this inflation in groceries , gas and many other things is not inflation at all and is totally offset by falling prices for computers , ipods and Miami condos (too bad that people without job and savings can not buy all these things , ha?).The point is that you can not change reality with fancy charts , inflation in the US is close to 10% today if you count food and energy and it is gonna become a LOT worse
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