The Inflation Illusion?
By Bryan Caplan
Once I finish refinancing my 30-year fixed-rate mortgage at a ridiculously low nominal rate, a giant inflationary surprise would probably be in my best interest. But Scott Sumner says I shouldn’t get my hopes up. The first and foremost of his “10 Reasons Not to Fear Inflation”:
I am a product of the 1970s, with a visceral distaste for
inflation. Yet despite the massive budget deficits and doubling of the
monetary base, I am for some strange reason worried about excessively
low inflation, rather than high inflation. Why?
1. The bond market shows very low inflation expectations.
Especially the TIPS spread. As I have said many times, “good
economists don’t make predictions, they infer market predictions.”
(It’s fun to create maxims that imply you are almost the only “good
economist” in the world.)