Inflation: “What, Me Worry?”

News Brief from AXA Equitable: Highlights from recent notable market news reports
January 20, 2012

Commentator Michael Kinsley seems to be challenging Mad Magazine icon Alfred E. Neuman (“What, me worry?”) in his latest column, “About Faster Inflation, Please Stay Worried” (Jan. 19, 2012, Bloomberg).

Kinsley has been warning of inflation since the crash of 2008-2009. “My reason was that I couldn’t see how the government could pay off the massive debt it was running up except by inflating at least part of it away,” he wrote in his latest column. “For this, I was widely ridiculed,” he wrote, but he’s not backing down.

“Barring a miracle, there will be a fierce storm of inflation sometime in the next few years and it will wipe out a big chunk of the national debt, along with the debts of individual citizens, and the savings of others,” he wrote.

Despite the warning, worrying about inflation seems to remain out of vogue.

“There are no signs of budding inflationary pressures,” Stuart Hoffman, chief economist at PNC Financial Services Group, told Bloomberg (“Four-Year Low in U.S. Jobless Claims May Bolster Spending in 2012: Economy,” by Bob Willis and Shobhana Chandra, Jan. 19, 2012, Bloomberg). “The core index is going to be pleasing to the Fed.”

“The lack of inflation is helping preserve household buying power,” Bloomberg reported, citing Labor Department data showing hourly earnings adjusted for prices rose 0.2 percent on average in December.

Worrying itself, however, never seems to go completely out of fashion (“As Dow Climbs, Worries Persist,” by Brendan Conway and Tomi Kilgore, Jan. 19, 2012, The Wall Street Journal).

The Journal notes that, despite rising stock indexes since Jan. 3, investors are worried about companies reporting disappointing earnings for the first time in years amid some indicators “sparking worries that overall economic activity may be stalling.”

“It kind of feels like the rally has lost momentum over the last few weeks, whether you look at the transports, the S&P 500 or the industrials,” Brian Lazorishak of Chase Investment Counsel told The Journal. “You’ve got a lot of mixed signals.”

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