Nope, No Inflation Around Here

The folks who have been opposed to stimulus, either by the government or The Federal Reserve, keep raising the specter of inflation.  Often they drag out the ghosts of hyperinflations past in places like 1923 Weimar Germany or modern day Zimbabwe. It’s always eithere inflation or government “bankruptcy” that’s just around the corner.  It’s supposedly this imminent inflation that will ruin us and that’s why, we’re told, we must tolerate unemployment of approx. 10% (worse if you count underemployment).

Over two years ago, these same people told us the Federal Reserve’s massive injection of reserves to save the banks would bring hyperinflation.  Nearly two years ago we were told Obama’s stimulus bill would bring deficits that would necessitate currency debasement and inflation.  More recently we’ve been told that the Federal Reserve’s QE2 securities buying operation would debase the currency and bring inflation and ruin.

Nonsense.  There’s no looming inflation or hyperinflation. Period.  This fear-mongering of inflation is born of bad, disproven theories.  (I hope to post more about that in the future).  For right now, let’s look at the data.

Calculated Risk updates us with the latest numbers just released for November 2010 below.  What all this econ-data-talk means is that no matter which data series you use, no matter what your favorite measure is, the year-over-year inflation has been less than 1%. And that is down from earlier:

In addition to the CPI release this morning from the BLS, the Cleveland Fed released the median CPI and the trimmed-mean CPI:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.1% (1.0% annualized rate) in November. The 16% trimmed-mean Consumer Price Index increased 0.1% (1.1% annualized rate) during the month. …

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.1% (1.5% annualized rate) in November. The CPI less food and energy increased 0.1% (1.2% annualized rate) on a seasonally adjusted basis.

Over the last 12 months, the median CPI rose 0.5%, the trimmed-mean CPI rose 0.8%, the CPI rose 1.1%, and the CPI less food and energy rose 0.8%

So these three measures: core CPI, median CPI and trimmed-mean CPI, all increased less than 1% over the last 12 months.

Inflation Measures Click on graph for larger image in graph gallery.

This graph shows these three measure of inflation on a year-over-year basis.

They all show that inflation has been falling, and that measured inflation is up less than 1% year-over-year.

Note: The Cleveland Fed has a discussion of a number of measures of inflation: Measuring Inflation

Now there’s another way to think about inflation. Instead of asking how much prices have gone up, we could focus on what people think prices will increase.  The best way to do this is to not only use different surveys, but also to compare the prices between government bonds that are not indexed for inflation with government bonds that are indexed for inflation. Fortunately, as Mark Thoma points out, The Cleveland Fed bank does that for us.  Here’s what they say:

Cleveland Fed Estimates of Inflation Expectations: The Federal Reserve Bank of Cleveland reports that its latest estimate of 10-year expected inflation is 1.64 percent. In other words, the public currently expects the inflation rate to be less than 2 percent on average over the next decade. … Estimates are updated once a month, on the release date of the CPI.

Latest Estimates

10-year-expected-inflation
(Click on the image to enlarge.)

Nope. No inflation around here.  No prospects for inflation around here.  Plenty of unemployed, though.