{"id":32178,"date":"2018-03-10T09:52:35","date_gmt":"2018-03-10T14:52:35","guid":{"rendered":"http:\/\/olduvai.ca\/?p=32178"},"modified":"2018-03-10T09:52:53","modified_gmt":"2018-03-10T14:52:53","slug":"an-inflation-indicator-to-watch-part-3","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=32178","title":{"rendered":"An Inflation Indicator to Watch, Part 3"},"content":{"rendered":"
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An Inflation Indicator to Watch, Part 3<\/a><\/h3>\n<\/header>\n
\n

\"\"<\/span><\/p>\n

\u201cDuring the 1980s and 1990s, most industrial-country central banks were able to cage, if not entirely tame, the inflation dragon.\u201d
\n\u2014Ben Bernanke<\/p><\/blockquote>\n

Ben Bernanke began his oft-cited \u201chelicopter speech<\/a>\u201d in 2002 with a few kind words about his peers, including the excerpt above. Speaking for central bankers, he took a large share of the credit for the low inflation of the 1980s and 1990s. Central bankers had gained a \u201cheightened understanding\u201d of inflation, he said, and he expected the future to bring even more inflation-taming success.<\/p>\n

Of course, Bernanke\u2019s cohorts took a few knocks in the boom\u2013bust cycle that followed his speech, but their reputations as masters of inflation (and deflation) only grew. Today, the picture he painted seems even more firmly planted in the public mind than it was in 2002, notwithstanding recent data showing inflation creeping higher.<\/p>\n

Public perceptions aren\u2019t always accurate, though, and public figures aren\u2019t the most reliable arbiters of credit and blame. In this 3-part article, I\u2019m proposing a theory that challenges Bernanke\u2019s narrative, and I\u2019ll back the theory with data in Part 3. I\u2019ll show that it leads to an inflation indicator with an excellent historical record.<\/p>\n

But first, let\u2019s recap a few points I\u2019ve already discussed.<\/p>\n

The Endless Tug-of-War<\/b><\/p>\n

In Part 2<\/a>, I said inflation depends on a tug-of-war between purchasing power (on the demand side) and capacity (on the supply side), and the war takes place within the circular flow<\/a>, <\/b>in which spending flows into income and income flows back to spending. Two circular-flow patterns and their causes demand particular attention:<\/p>\n

    \n
  1. When banks inject money into the circular flow in the process of making loans, they can boost spending above the prior period\u2019s income, thereby fattening the flow (or the opposite in the case of a deleveraging).<\/li>\n<\/ol>\n

    …click on the above link to read the rest of the article…<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    An Inflation Indicator to Watch, Part 3 \u201cDuring the 1980s and 1990s, most industrial-country central banks were able to cage, if not entirely tame, the inflation dragon.\u201d \u2014Ben Bernanke Ben Bernanke began his oft-cited \u201chelicopter speech\u201d in 2002 with a few kind words about his peers, including the excerpt above. Speaking for central bankers, he […]<\/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":[19233,68,98,18667,202,10520,305,19234,353,426,4520,18670,8666,11866,12096,4638,7080],"class_list":["post-32178","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-created-money","tag-ben-bernanke","tag-business-cycle","tag-circular-flow","tag-deflation","tag-disinflation","tag-federal-reserve","tag-ffwiley","tag-gdp","tag-inflation","tag-m2","tag-m63","tag-mainstream-economics","tag-monetarism","tag-monetary-aggregates","tag-recessions","tag-trade-balance"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/32178","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=32178"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/32178\/revisions"}],"predecessor-version":[{"id":32179,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/32178\/revisions\/32179"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=32178"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=32178"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=32178"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}