Since the economic crisis of 2009, the most incorrect call that people have made has been to call for inflation or hyperinflation due to aggressive monetary easing and/or large government deficits.
In a recent blog post, the pseudonymous hedge fund manager Pawelmorski wrote this fantastic line:
Inflation is clearly in the toilet and not set to resurface any time soon (so to speak), and looking really extraordinarily low once you look at core measures. The hyperinflationistas have lost the argument so comprehensively that you have a certain grudging admiration that they’re still sharing their wisdom.
We really don’t need to go back over all of the hyperinflationistas being referred to here. Basically anyone who’s turned on CNBC over the years has heard someone predict a collapsing dollar and spiraling prices, thanks to crazy Bernanke and his magic printing press.
Cartoons of Bernanke maniacally flooding the world with dollars litter the web.
But it’s easy to debunk the misinformed beliefs of the gold bugs who plainly haven’t understood the plot.
The more fascinating thing is that even here in 2013, we’re not seeing much garden variety inflation.
In a recent note, BofA’s Ethan Harris called the lack of global inflation the the big story of the year. In a world where central banks are characterised as aggressively going to “war” on monetary policy, inflation is once again surprising to the downside.
Why aren’t we seeing any inflation this year, even in the US where things are better?
In a recent post, Hale Stewart posits four ideas:
- Slack demand from China.
- The US oil boom (abundance produces the opposite of inflation).
- Slow growth (especially in Europe).
- The end of the commodity boom.
- Ongoing reduction of high household debt.
Bottom line. The big, ongoing story is the death of inflation all around the world.
While it’s true that gold had a great run for a few years. And the people who predicted ongoing economic misery deserve a lot of credit. The folks who said anything about inflation or hyperinflation get big fat zeros.
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