The Street Gets Inflation Threat Backwards

In my opinion, the majority of economists, strategists and financial media -- the full "punditocracy" -- are exactly wrong on inflation. Indeed, I am hard pressed to think of another item of such grave economic consequence that most of the Street has so backwards.

The problem is, they are looking for inflation in all the wrong places. The inflation (ex-inflation) crowd has managed to ignore robust price increases across a variety of goods and services. Yet somehow they seem to have found inflation in the one part of the economy where there is almost none: wages.

One only had to see the market reaction to last week's data on non-farm payrolls, hourly wages and unemployment rate to realize how much the Street has gotten its panties in a bunch. ...