Looking back on my debate late last summer with Josh Hausman on whether controlling U.S. inflation is likely to require a substantial recession. At the time, the most ground that I could give was...
I think you are right about the present inflation most closely resembling that of the 1940s and 1950s. We've had a number of supply side shocks, but they've been working through the system. The 1966-1984 inflationary era lines up all too well with the baby boomers hitting age 20, but more recent generations have been much less affluent and less likely to drive inflation.
What if the supply shock was meant to continue for the intermediate to long term? There are lots of forces at play that defend this scenario. The only traditional play was to force interest rates to create disinflation. But is unemployment the necessary result? In the early 80’s, unemployment was mitigated by the Computer Revolution. In the 90’s unemployment was cured by the internet and dot com bubble. So what industry will rise in the 2020’s that has been incubating in Washington? I hope they get really original. For certain it won’t be traditional materialism that plays into the current supply shock.
Sticky price index less food & energy - 3 mo annualized change is 5.3%
If you exclude shelter as well it is 2.1%.
A whole lot of inflation is caused by a shelter rent imputation that is completely at odds with market measures of rent and home prices.
https://fred.stlouisfed.org/graph/?g=ZMrc
I think you are right about the present inflation most closely resembling that of the 1940s and 1950s. We've had a number of supply side shocks, but they've been working through the system. The 1966-1984 inflationary era lines up all too well with the baby boomers hitting age 20, but more recent generations have been much less affluent and less likely to drive inflation.
What if the supply shock was meant to continue for the intermediate to long term? There are lots of forces at play that defend this scenario. The only traditional play was to force interest rates to create disinflation. But is unemployment the necessary result? In the early 80’s, unemployment was mitigated by the Computer Revolution. In the 90’s unemployment was cured by the internet and dot com bubble. So what industry will rise in the 2020’s that has been incubating in Washington? I hope they get really original. For certain it won’t be traditional materialism that plays into the current supply shock.