• Inflation Watch

    This post originally appeared on The Finance Buff.

    This is the next of my occasional posts on inflation. By and large, many economists are not worried about inflation now, though there is, of course, some debate on the matter. In a June 10, 2009 NY Times Economix post “Inflation and Government Spending“, Casey Mulligan summarizes research that suggests government non-war spending is not inflationary. To quote the Economix post,

    Our study found significant positive correlations between inflation and government spending only in cases when military spending grew — as it does during wartime. But the government spending growth we have seen in 2008 and 2009 comes from the nonmilitary part of the budget.

    Taxpayers will suffer as a result of the federal government’s recent and excessive spending, but a great many taxpayers around the world have faced similar liabilities, while nonetheless experiencing modest or low inflation.

    I have no opinion as to whether or not we’ll see high inflation as a result of recent fiscal and monetary policy. As I come across opinions expressed by economists on the matter I’ll post them. Feel free to draw my attention to them if you see any yourself.

    • i’m with you that i don’t really have a strong opinion either way, although we are definitely hedging against high inflation in our client’s portfolios. i just wanted to point you to a great blog post, probably the best i’ve seen arguing against future inflation: SMACKDOWN WEEK: Now consumers are all but extinct.

    • @adam – Thanks. that accrued interest blog post is reminiscent of James Hamilton’s analysis, to which I linked in one of my other inflation-related posts. We’ll add it to the pile of “no inflation here” votes.