Sunday, February 03, 2008

Let's talk about inflation, baby

FINALLY... amongst all of the talk about interest rates and recession, someone bring up the problem of inflation.

I've been yabbering on about inflation for a while but it seemed no one was paying attention to me... I was starting to take it personally.

Greg Mankiw weighs in with:

A rise in expected inflation is not consistent with the conventional wisdom that the economy is on the verge of a serious slump driven by inadequate aggregate demand.

My thoughts (sorta) on that here and here.

In a nutshell, recession talk in the US may be fueled by low domestic demand, but high global demand for products will keep pushing prices up at the exact same time the US dollar (read, American’s ability to buy stuff) drops.

No comments: