07/14/2009

Inflated Obsession

As the economic data continues to send mixed signals about the pace and timing of an economic recovery, we've been treated to a chorus of warnings about the next danger: inflation. An early July client survey done by Credit Suisse showed that investors were "almost unanimously concerned" with inflation. Writing in The Wall Street Journal last month, Arthur Laffer announced that the very policies that stemmed the recession--low interest rates, massive government spending--will provoke an inflationary scenario reminiscent of the 1970s, or worse. Harvard economist Martin Feldstein has said bluntly that inflation is likely to pose a substantial threat to global stability starting next year. And it's not simply conservatives with an aversion to Keynes who are sounding alarmed. Simon Johnson, former chief economist for the International Monetary Fund, has warned that inflation could soon exceed 5 percent and quickly head higher.
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