For nearly two years now the neoclassical, quantity-of-money-theory inspired folks have been fearing inflation. Inflation, it has been said, was the necessary end result of the government deficits and central bank bailout efforts that helped keep the Great Recession from turning into Great Depression 2.0. Let’s look at the data:
This graph shows three measure of inflation, Core CPI, Median CPI (from the Cleveland Fed), and 16% trimmed CPI (also from Cleveland Fed).
They all show that inflation has been falling, and that measured inflation is up less than 1% year-over-year.
All this while the Central Bank (The Fed) claims it’s inflation target is 2-3%. Sorry folks, the “inflation is coming, inflation is coming” chicken littles lose this one. That graph is definitely going downward. What we have to fear is deflation, not inflation.