Inflation Statistics Don't Always Tell the Truth | Newsweek International

The Premature Exit
Barrett Sheridan 9/26/2009 12:00:00 AM
William Mcchesney Martin, America's longest-serving central banker, once quipped that it's the job of the Federal Reserve to "take away the punch bowl just as the party gets going." His lesson seems to have been a bit too well taken by today's leaders, who lately seem more concerned with the irrational exuberance of tomorrow than the anemic economy of today. Recently German Finance Minister Peer Steinbrück asked world leaders to consider coordinated "exit strategies" from the trillions of dollars' worth of stimulus programs enacted in the past year. Soon after, the heads of Australia and South Korea teamed up to offer concrete policies for "unwinding the policies of the crisis." To varying degrees, the U.S., U.K., France, and other major nations have also exhorted the world to start thinking about how to end the loose-money policies of the past year that kept interest rates low and handed free cash to consumers.
Deflation and Inflation?
Robert J. Samuelson 6/6/2009 12:00:00 AM
To make sense of today's most perplexing economic debate–whether we're flirting with inflation or—deflation—it's worth recalling what happened after World War II. Under intense political pressure, President Truman lifted wage-price controls. All heck broke loose. Suppressed during the war, wages and prices exploded. Autoworkers, steelworkers and others went on strike for higher pay. In 1946 and 1947, consumer prices rose 8.5 percent and 14.4 percent, respectively.
PERISCOPE
Turning Japanese: How Low Can Prices Go?
Christian Caryl 12/20/2008 12:00:00 AM
Comparisons between the United States today and Japan in the early 1990s just keep growing. The Japanese call that period the "Lost Decade," as it was marked by anemic growth, plummeting prices and the lingering death of insolvent banks. There was, however, one product everyone wanted: a safe. If you couldn't trust banks to hold your savings intact, why not do it yourself?
The Bad News About Falling Oil Prices
Daniel Gross 9/4/2008 12:00:00 AM
The big story in the markets this week is the continuing decline in commodity prices. Having flirted with $150 per barrel earlier this year, oil was trading on Wednesday at about $109. The Dow Jones/AIG Commodity Index is now down 0.6 percent for the year. Many are hoping that subsiding inflationary pressures will make consumers feel better and make it unlikely the Federal Reserve will boost interest rates. On Aug. 22, Federal Reserve Chairman Ben Bernanke said that if slow growth and the declines in commodity prices persist, that should "lead inflation to moderate later this year and next year." (Alas, he noted, in true central banker style, that "the inflation outlook remains highly uncertain.") Accordingly, the markets for Federal Funds rate futures show that traders today believe there's a 94 percent chance the Federal Open Market Committee will keep rates steady at its September meeting (up from a 66 percent chance a month ago), and an 88 percent chance that it will do so at its late October meeting (up from a 46 percent chance a month ago).
ECONOMICS
Up, Up and Away ...
Rana Foroohar 8/2/2008 12:00:00 AM
Globalization used to be all about making things cheaper. It's hard to think of much that didn't go down in price over the past few decades—cars, electronics, consumer goods of all kinds, services like banking and telecommunications—as the global movement of goods, labor and capital played out around the world, enriching developed countries and emerging markets alike. In fact, between 2003 and 2007, world GDP grew 5 percent per year—faster than it ever has—even as inflation remained under 4 percent. Freer trade, cheaper emerging-market labor, better technology and more plentiful capital all collided to make this early part of the century the most prosperous in the history of our planet.
You Call this a Depression?
Robert J. Samuelson 7/23/2008 12:00:00 AM
The specter of depression stalks America. You hear the word repeatedly. Are we in a depression? If not, are we headed for one? The answer to the first question is no; the answer to the second is "almost certainly not." The use of "depression" to describe the economy is a case of rhetorical overkill that speaks volumes about today's widespread pessimism and anxiety. A short history lesson shows why.