Debunking Deflation

I probably shouldn't second-guess Fed Chief Greenspan, but I have a different view about deflation: It isn't happening and it isn't on the horizon.

Sure, Greenspan told Congress yesterday that deflation "is sufficiently large that it does require very close scrutiny and maybe action on the part of the central bank." And, yes, April's headline Consumer Price Index number showed a 0.3% decline. But let's drill into the recent inflation figures and consider inflationary forces at work around the country.

Here's how the CPI breaks down: housing accounts for 40.04% of the index; transportation gets a 17.77% weighting; food and beverage consumes another 15.45%. and medical care reflects 5.56% of any price change in the index. These four groups alone account for the bulk -- 78.82% -- of the CPI.

Now let's look at prices in the two states that set trends for the country, California and New York.

Rents Still Inflated

...