Chapman on Inflation
By David Henderson
One thing I’ve always liked about Chicago Tribune columnist Steve Chapman’s writing is its high degree of sophistication in economics relative to the usual in regional and even national newspapers. Exhibit A is his column today on inflation. He brings together a lot of strands that bloggers like Scott Sumner and Paul Krugman have been blogging about and does it tersely and accurately. Although I think his bottom line is very slightly overstated, the whole piece is an excellent polemic. And if you think I’m using the word wrong, check the dictionary. Many people use the word “polemic” to include the connotation of bias. That’s not what it means.
The two best paragraphs:
But gold prices were also on a rocket during the previous eight years. And they were not a portent of raging inflation. During the administration of President George W. Bush, the consumer price index rose at an average rate of less than 3 percent per year — while gold was tripling in value.
Oil and other commodities, believe it or not, can be affected by events that don’t occur in the United States. Bentley University economist Scott Sumner, who sees no chance of an inflation outbreak, attributes rising prices for oil and other goods to strong demand in developing countries, particularly China.
One other excerpt:
Investors wouldn’t be snapping up three-year Treasury notes at 1 percent if they were expecting their purchasing power to be ravaged by wolves any moment now.