Inflation: Hoenig’s Folly

Drip, drip, drip. Another month goes by and still no sign of the upheaval wrought by all that reckless Federal Reserve Board money printing. Today’s news that core inflation checked in at 0.1% last month is no surprise to those like us who aren’t trying to conjure up false fears. But to those such as Thomas Hoenig this is one more disappointing data point.

What point is there to being the heroic defender of stable money when inflation persists in staying low, and the reckless Fed is producing stable money despite you?

Of course, as Paul Krugman says today, now would be a good time to think through what we mean by “money” in the context of a modern economy. Whatever it is, we don’t seem to have enough to make Hoenig’s ghosts a reality.

No matter. I expect the fearful drumbeat to continue. And I expect our hyper critical media to repeat it.

Folks: we are stuck deeply in a rut caused by a lack of demand. We have massive over capacity, as witnessed by our high unemployment rate. Households aren’t spending at a strong rate. Businesses have practically no room to pass higher costs along to consumers. Therefore higher inflation is a way off. Let’s focus on the big picture here and not tell tall tales to one another.

Besides I think Krugman’s right: we have no idea what we mean by “money”. Not that it plays much of a role in orthodox economic theory, but that’s another argument.

Sigh.