I have previously accused supply-siders (See for example here and here ) of having a double standard over their inflation indicators, such as gold and commodity price indexes, choosing to ignore them when they -as they do now- show significant inflation. Both gold and various broader commodity price indexes have increased sharply in the last few years, particularly the latest few months, yet Larry Kudlow and other NRO writers either completely ignore this or argues that it don’t matter because bond yields are low or because commodity price indexes in euros or yens have risen even more.
Yet, it seems that this was a over-generalization. Apparently, there are a few supply-siders , including Brian Wesbury and sometimes NRO contributor Donald Luskin who argues that the commodity price boom indicate inflation. Now, even Jack Kemp joins this group, calling on Ben “Blackhawk” Bernanke to drop fewer dollar bills from his helicopter. He quotes Luskin as saying that the Fed have pursued a too loose monetary policy during the last few years.
Interesting conversion, if sincere, as Kemp as late as two months ago warned of a “excessively tight” monetary policy.
Meanwhile, Jerry Bowyer (author of a book called “The Bush Boom”) at NRO , attacks these supply-siders , arguing that gold is , if not a barbarous relic, then at least a misleading “mania” attributable to “Jude Wanniski’s shadow”. He argues that since the consumer price index haven’t accelerated, the gold price approach is wrong. Yet even apart from the fact that the CPI have in fact accelerated (to 4% year-over-year in January), it is well worth noting that as late as 16 days ago did the same Bowyer use a commodity price index (Needless to say, he uses the commodity price index which have increased the least, although even that index have risen significantly in recent months) not as a leading indicator of inflation, but as the definition of inflation.
{ 4 comments }
If gold is a “barbarous relic” or at least a misleading “mania” attributable to “Jude Wanniski’s shadow”, then why do central banks and national governments continue to own vast quantities of the metal? I do not believe that they have intentions of entering the jewelry or electrical equipment manufacturing businesses. In fact, if governments sold their gold holdings, they could, at least in the short term, reduce their chronic deficits.
The central banks and governments, despite their untruthful and hypocritical rhetoric to the contrary, continue to own large quantities of gold because they understand its fundamental monetary importance.
Dennis:
Either that or like the dragon in Grendel, he just wanted to steal a pile of gold and sit on it.
I tend to believe your more scary premise that the governments of most countries are trying to build an insurance policy to save their own butts from their inflationary economic policies.
I like to stay out of discussions of “inflation” except to ask what is “inflation”? What are you talking about? The classical definition of an increase in the money supply? Or the more contemporary definition of an increase in the Consumer Price Index? If it’s the latter, which consumer are you referring to; me, you, my mom? We all have our own price index which is a function of our lifestyles and no two are alike or even resemble the official “consumer price index”.
Well, what matters here is not so much what we think inflation is , but what the supply-siders think inflation is. And they have been given different definitions of inflations-indeed, sometimes the same person have been defining inflation differently at different occasions. Some supply-siders define inflation as a higher gold price and others define it as a increase in some commodity price index- while yet others regard the price of gold and other commodities as being merely leading indicators of future consumer price inflation. And as I pointed out in the original post, Jerry Bowyer defined inflation on February 6th as an increase in the commodity price index called the CRB Spot Index, while on February 21 he redefined it to mean a increase in the consumer price index.
Comments on this entry are closed.