Inflation is low, conservative economists are wrong, sun rises in east
by David Atkins
Remember how all the Serious People said that quantitative easing, loose monetary policy and fiscal stimulus was going to lead to out-of-control inflation that would doom the dollar, destroy America, and hamper the world's economy? About that:
The leading economies of the industrialized nations may not have a lot in common, but they are all afflicted by this: Inflation is too low.
That was the astoundingly consistent theme out of a range of data released Thursday. Prices rose 1.1 percent over the 12 months that ended in April in Germany, 0.8 percent in France and 1.3 percent in Italy. In the United States, the consumer price index rose 1.1 percent over the last year. Japan reported surprisingly strong first-quarter growth this week as its aggressive new stimulus policies took effect, but that came against a backdrop of continued falling prices; its consumer price index fell 0.9 percent in the year that ended in March.
The leading central banks at this point are all unified on this: 2 percent is the amount of annual inflation they are aiming for. And they are all failing in that mission, and nearly all failing in the same direction (Britain is the notable exception; prices there rose 2.8 percent over the year that ended in March, the most recent data available).
The world is in deflationary spiral, not an inflationary one. Just as Keynesian economists predicted, and as conservative economists insisted could never happen.
Throw this in there with the disproven claims that bond vigilantes would punish the dollar for the S&P downgrade, that tax cuts would lead to economic growth, that deregulation would lead to endless prosperity and self-policing markets, that lower taxes would lead to increased revenues, and that austerity would lead to increased investor confidence and lower unemployment. All wrong. Dead wrong.
Is there anything that conservative economists have gotten right lately? Anything at all?
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