{"id":31185,"date":"2018-02-18T20:32:18","date_gmt":"2018-02-19T01:32:18","guid":{"rendered":"http:\/\/olduvai.ca\/?p=31185"},"modified":"2018-02-18T20:32:54","modified_gmt":"2018-02-19T01:32:54","slug":"an-inflation-indicator-to-watch-part-1","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=31185","title":{"rendered":"An Inflation Indicator to Watch, Part 1"},"content":{"rendered":"<header class=\"entry-header comment-icon\">\n<h3 class=\"post-title\"><a href=\"http:\/\/ffwiley.com\/blog\/2018\/02\/18\/an-inflation-indicator-to-watch-part-1\/\">An Inflation Indicator to Watch, Part 1<\/a><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<p><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-1341 size-medium alignnone\" src=\"http:\/\/ffwiley.com\/wp-content\/uploads\/2018\/02\/inflation-image-6-240x300.jpg\" sizes=\"auto, (max-width: 80px) 100vw, 80px\" srcset=\"http:\/\/ffwiley.com\/wp-content\/uploads\/2018\/02\/inflation-image-6-240x300.jpg 240w, http:\/\/ffwiley.com\/wp-content\/uploads\/2018\/02\/inflation-image-6.jpg 310w\" alt=\"\" width=\"80\" height=\"100\" \/><\/p>\n<blockquote><p>\u201cInflation is always and everywhere a monetary phenomenon.\u201d<br \/>\n\u2014Milton Friedman<\/p><\/blockquote>\n<p>Have you ever questioned Milton Friedman\u2019s famous claim about inflation?<\/p>\n<p>Ever heard anyone else question it?<\/p>\n<p>Unless you read obscure stuff written for the academic community, you\u2019re probably not used to Friedman\u2019s quote being challenged. And that\u2019s despite a lousy forecasting record by economists who bought into his <a href=\"https:\/\/en.wikipedia.org\/wiki\/Monetarism\" target=\"_blank\" rel=\"noopener\">Monetarist<\/a> methods.<\/p>\n<p>Consider the following:<\/p>\n<ul>\n<li>When Friedman\u2019s strict Monetarism fizzled in the 1980s, it was doomed partly by his own forecasts. Instead of the disinflation the decade delivered, he expected inflation to reach 1970s levels, <a href=\"http:\/\/citeseerx.ist.psu.edu\/viewdoc\/download?doi=10.1.1.361.8119&amp;rep=rep1&amp;type=pdf\" target=\"_blank\" rel=\"noopener\">publicizing<\/a>that prediction in 1983 and then again in 1984, 1985 and 1986. Of course, years earlier he foresaw the 1970s jump in inflation, but the errant forecasts that came later left him wide open to a \u201cclock twice a day\u201d dismissal.<\/li>\n<li>Monetarists suffered an even harsher blow in 2012, when the Conference Board finally threw in the towel on Friedman\u2019s favorite indicator, <a href=\"https:\/\/www.conference-board.org\/pdf_free\/workingpapers\/EPWP1106.pdf\" target=\"_blank\" rel=\"noopener\">removing M2<\/a> from its Leading Economic Index (LEI). Generally speaking, forecasters who put M2 in their models are like bachelors who put \u201clive with mom\u201d in their dating profiles\u2014they haven\u2019t been successful.<\/li>\n<li>The many economists who expected quantitative easing (QE) to wreak havoc on inflation are, of course, on the defensive. Nine years after QE began, core inflation remains below the Fed\u2019s 2% target, defying their Monetarist beliefs.<\/li>\n<\/ul>\n<p>When it comes to explaining inflation, Monetarism hasn\u2019t exactly nailed it. Then again, neither has <a href=\"https:\/\/en.wikipedia.org\/wiki\/Keynesian_economics\" target=\"_blank\" rel=\"noopener\">Keynesianism<\/a>, whose <a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2017-08-24\/phillips-curve-doesn-t-help-forecast-inflation-fed-study-finds\" target=\"_blank\" rel=\"noopener\">Phillips<\/a> <a href=\"https:\/\/www.brookings.edu\/wp-content\/uploads\/2017\/10\/es_wp33_tarullo.pdf\" target=\"_blank\" rel=\"noopener\">Curve<\/a> <a href=\"https:\/\/www.bankofengland.co.uk\/-\/media\/boe\/files\/speech\/2017\/the-phillips-curve-lower-flatter-or-in-hiding-speech-by-jon-cunliffe.pdf\" target=\"_blank\" rel=\"noopener\">confounds<\/a> <a href=\"https:\/\/www.weforum.org\/agenda\/2015\/10\/does-the-phillips-curve-need-updating\/\" target=\"_blank\" rel=\"noopener\">those<\/a> who rely on it. You can toss inflation onto the bonfire of major events that mainstream theories fail to explain.<\/p>\n<p>But I\u2019ll argue there might be a better way.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>An Inflation Indicator to Watch, Part 1 \u201cInflation is always and everywhere a monetary phenomenon.\u201d \u2014Milton Friedman Have you ever questioned Milton Friedman\u2019s famous claim about inflation? Ever heard anyone else question it? Unless you read obscure stuff written for the academic community, you\u2019re probably not used to Friedman\u2019s quote being challenged. And that\u2019s despite [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[18666,68,18667,155,18671,12891,18668,353,426,6841,18669,4519,4520,18670,8666,2586,11866,12096,614,10324],"class_list":["post-31185","post","type-post","status-publish","format-standard","hentry","category-economics","tag-anna-schwartz","tag-ben-bernanke","tag-circular-flow","tag-conference-board","tag-daniel-nevins","tag-economic-forecasting","tag-financial-accelerator-model","tag-gdp","tag-inflation","tag-keynesianism","tag-leading-economic-index","tag-m1","tag-m2","tag-m63","tag-mainstream-economics","tag-milton-friedman","tag-monetarism","tag-monetary-aggregates","tag-paul-krugman","tag-phillips-curve"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/31185","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=31185"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/31185\/revisions"}],"predecessor-version":[{"id":31186,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/31185\/revisions\/31186"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=31185"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=31185"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=31185"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}