Inflation, Lovely Inflation

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Paul Krugman points out today that core inflation is at its lowest level since recordkeeping began in 1957. But that’s a lot clearer in chart form, isn’t it? So here it is:

This, of course, explains the Fed’s quantitative easing program. For a variety of good reasons, the Fed primarily uses core inflation to measure price levels in the economy, and core inflation dropping to 0.6% has put the economy at risk. So we want more inflation, and we can get it with very little prospect of future trouble. For comparison, here’s a chart showing inflation in Great Britain recently:

Ryan Avent writes:

The Bank of England is in a tricky position. It likely feels that prices haven’t risen more based on market belief in the Bank’s credibility, but each month that the Bank doesn’t clamp down on inflation that credibility erodes a bit. The Bank is reluctant to supress price increases just now, however, because of the substantial fiscal tightening that’s looming just over the horizon. On the one hand, this is a tricky position for a central bank to be in. On the other hand, it’s the rare rich world country that wouldn’t trade places with Britain. The last two quarters have produced surprisingly strong growth, giving both the Bank of England and the government more of a cushion to address other policy goals.

Tricky indeed, but take a look at the graph. When did inflation start rising in Britain? In the middle of 2009. And when did growth start surging? About two quarters later. Analysts claim that Britain is now “overshooting” its inflation target, but if this is the result of overshooting then maybe we could use a bit of the same ourselves?

Not everyone feels the same way, of course. The result has been a strange-bedfellow war against the Fed, described well today by Noam Scheiber. It’s yet another example of the rich enlisting the poor to support policies designed to safeguard the rich. So far they’ve been pretty successful.

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THE BIG PICTURE

You expect the big picture, and it's our job at Mother Jones to give it to you. And right now, so many of the troubles we face are the making not of a virus, but of the quest for profit, political or economic (and not just from the man in the White House who could have offered leadership and comfort but instead gave us bleach).

In "News Is Just Like Waste Management," we unpack what the coronavirus crisis has meant for journalism, including Mother Jones’, and how we can rise to the challenge. If you're able to, this is a critical moment to support our nonprofit journalism with a donation: We've scoured our budget and made the cuts we can without impairing our mission, and we hope to raise $400,000 from our community of online readers to help keep our big reporting projects going because this extraordinary pandemic-plus-election year is no time to pull back.

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