Higher Is Not Down
By David Henderson
In a front-page report in the Wall Street Journal on low inflation in the United States (where the inflation rate for the past 12 months was only 1.2%) and in the euro zone (where it was only 0.9%), the authors, Sudeep Reddy, Brian Blackstone, and Jason Douglas, write:
The downward pressure on prices presents a conundrum for policy makers across advanced economies.
No, it doesn’t. Low inflation may present a conundrum, but “downward pressure on prices” doesn’t present a conundrum because prices are rising. That’s what inflation means. Sure, some prices have fallen, but others have risen more than enough to offset those falling prices. That’s another way of saying that we have inflation.
These supposedly sophisticated economics reporters for one of the world’s leading financial publications have failed to distinguish between falling inflation and falling prices.
As Brad DeLong is wont to ask, “Why oh why can’t we have a better press corps?”