The economic data from all quarters is breathtaking this morning. Look around. The evidence is clear that Bernanke w/assists from the PBOC, BoE, and ECB have unleashed another inflationary boom, soon to be bubble. Tightening to come in the U.K. and Europe before summer. Bernanke is a truly misguided academic bureaucrat who will never admit a mistake, thus I expect US policy to stay easier for far longer.
Not if Uncle Axel has anything to say on the matter. The ECB has already administered an underhanded hike, but allowing EONIA to go up smth like 75 - 100bps since mid-2010. My point is that if inflation is a highly regressive tax that doesn't pass into wages (and it hasn't so far), isn't it likely to be a net negative for the economy? If so, isn't it its very nature to deflate whatever bubble you think is being inflated?
Semantics. If the ECB hikes after June 17, you'll be right. Congrats. The fact is that the central banks (mostly the Fed in cahoots with insane US fiscal policy) have ignited yet another inflationary boom/bust cycle which some of us hoped would be stopped, at least for a little while, by the GFC.
Lovely circular reasoning. Why not just print away, as the nature of the economy will end the excess before it can really get started. I thought we put that argument to rest last cycle. The fact that you bring up wages tells me you're starting from the wrong point. Inflation isn't too much money chasing too few goods, its too much money. Period. Whether it shows up in wages, goods, NFLX, JJG, or whatever ... it distorts and causes booms from which there inevitably must be busts.
I don't see how this is circular. The danger of "just printing away" is that a wage-price cycle eventually gets ignited and that's when things get unpleasant. I fail to see how that can happen in the current environment. BTW, this, since you mention the BoE, is precisely the argument that Mervyn King is making and why he's stubbornly been on hold in spite of CPI printing, on average, 1.3% above target. I don't believe I am starting from the wrong point. As I have said many times, deleveraging will happen in the West, since it simply has to. It's pre-ordained by basic economics, so I really don't see any "inflationary bubbles" created any time soon. Regardless, time will tell.
I'm not sure using King to support your arguments is a good idea. He's proven himself to be as much of an inflationist as Ben. Yet another member of the MPC has been peeled off to the "increase rates now" side, as last month's vote was 6-2-1 (Adam Posen is deranged enough to sit on the Fed). I read somewhere that inflation has been above target in the U.K. for like 46 out of 50 months, yet King ascribes it to temporary factors. I don't have any Phd's, but it seems like if something is "temporary" for 4 years running, maybe it's not temporary.
I am not using King's opinion to support my argument. Whatever gave you that idea? In general, his views and actions are his own. It just so happens that one of the points he normally makes I agree with. It doesn't mean I agree with his actions or all of his arguments. Anyways, forget I ever brought Merv up, it's a distraction and I apologize.