Interesting article in The Economist on how inflationary pressures are increasing in America and elsewhere. Actually I would however rather describe it as monetary inflation increasingly taking the form of consumer price inflation, but let’s not be picky.
As the article points out, the year to year increase in the consumer price index is expected to reach 4% in September, the highest since 1991. Moreover, not only are current inflation high, but inflationary expectations are also picking up as is indicated by consumer surveys, a rising spread between the yield of regular bonds and inflation-protected bonds and a rising gold price.
A similar story is seen in the Euro-zone and Britain too. Japan’s consumer price index is still falling, but that may change soon.
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It’s also interesting to note, that “inflation” is termed in a price-package by the government. Of course, they choose very favorable price settings to show that inflation is not a problem, while money production is up to 10%. Libertarian economists in Germany estimate that countries like Italy and Greece have inflation-rates above 10%, thus there is a distortion in European inflation rates.
Read Jim Puplava’s
http://www.financialsense.com/stormwatch/2005/0624.html
which basically outlines how the U.S. CPI calculation method has changed to the point of ridicule (if anyone bothered to look).
If you calculated CPI today using the original method, headline would be north of 6%.
Would bonds be nearing 4% with those kind of prints do you think?
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