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A Whole New Error

The Mouth takes on some New Era thinking.

Medicine Show

JACKSON HOLE, Wyo. -- And today we think globally.


gross domestic product

, or GDP,

grew 3.4% in 1996. Then it grew 3.9% in 1997. Then it grew 3.9% again in 1998.


price index

grew 1.9% in 1996. Then it grew 1.9% again in 1997. Then it grew only 1% in 1998.

Those are facts.

It is a fact that the past three years have delivered a deceleration in prices in the face of an acceleration in growth.

And an important fact it is.

Indeed. The whole New Era argument draws entirely on it -- and on it alone.

That is terribly important to understand: The whole New Era argument draws entirely on the performance of the economy between 1996 and 1998 -- a three-year period that delivered bigger growth increases alongside littler price increases.

Trend productivity has genuinely surged -- the superb growth-price combo we saw between 1996 and 1998 owes not to a host of temporary and favorable supply shocks, but to New Era technology -- and so the ever kinder price increases it has produced are now the rule rather than the exception.

The proof is right there in the 1996-1998 data, and anyone who doesn't see it is stuck in another decade.

And on the telly late yesterday, that was precisely the slop pouring out of the fat pie-hole of one of the dimmest New Era chaps around.

A True Blue Spectacle

What said sap failed to mention was that because price increases are also kinder around the globe, surely the New Era is not limited to the U.S.

It must be nothing short of a worldwide phenomenon.

Consumer prices in Italy, for example, which were rising at a 1.8% year-on-year rate a year ago, are rising at a 1.7% rate now.

Consumer prices in Britain, which were rising at a 3.7% rate a year ago, are rising at a 1.3% rate now.

Consumer prices in Germany, which were rising at a 0.9% rate a year ago, are rising at a 0.6% rate now.

And consumer prices in France, which were rising at a 0.8% rate a year ago, are rising at a 0.4% rate now.

Flat-out impressive, that. Prices are decelerating everywhere, and the United States has the biggest (!) inflation rate -- 2.1% -- of all the


countries (the four above plus Canada and Japan).

So the whole world's in a New Era, right?

I Believe My Humor's Wearing Thin

You tell me. Which is easier to believe?

Is it easier to believe that a New Era -- one revolutionary enough to be rewriting the laws of supply and demand -- is producing miracles?

Or is it easier to believe that a host of supply shocks and the recent stagnation in global demand -- things that, even if not set to reverse sharply and suddenly, have now arguably run their course -- have been forcing firms everywhere to push through smaller price increases than would otherwise have been the case?

Think hard about it.

Then choose the one that's right for you.


As to that guy on television this morning? The one who thinks

Lawrence Kudlow

has it "dead right"?

It's never a good idea to do what the


do when they have


tied to the testimony table -- meaning holding up some remedial-ass chart and bashing concepts (such as the

Phillips Curve

) you can't even define -- when you want people to take you seriously.

And for the record, here's what Larry wrote a week ago.

Barring an unexpectedly bad core CPI number due out this coming Tuesday, I believe the Fed should not and will not tighten policy.

Keep it in mind.

And as to the (apparently popular) notion that the price measures have even less of a chance of accelerating if GDP begins to decelerate?


Economic growth decelerated to a 2.3% pace in 1995 from a 3.5% pace in 1994, and during those years core consumer inflation accelerated to 3.0% from 2.6% and service-price inflation accelerated to 3.5% from 2.9%.

Side (Chicago Deep) Dish

Call 1.800.LOU.TO.GO and have


deep dish (especially the sausage) overnighted.

It is better (and cheaper) than sex.

Enough already?


Guy washing boat.

Anything Life-of-Kubrick.

Tired-ass Task columns.

Former Mousketeer-cum-current teen sensations.