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Staying Calm About Inflation

An anecdotal tour of the inflation front lines shows that prices are not likely to spiral out of control anytime soon.

SAN FRANCISCO -- It feels like this inflation thing just won't go away. My old pal

James Padinha

continues to harp on the

inflationary theme, but that's not a huge surprise. First, he's obsessed with inflation. Second, he lives in Jackson Hole, Wyo., not exactly the epicenter of the consumer frugality movement or any other inflation-crushing initiative.

But while Padinha stares at the


, why don't we take an anecdotal tour of the inflation front lines and see what's out there.

Employment tightness.

Yes, employment remains tight, but it has been tight for some time. Why suddenly all the concern? Those economists focused on tight labor markets do not place enough emphasis on globalization. Corporations shift jobs to places like Canada or Mexico or Europe when folks get too expensive here. And right now Europe could use a few more jobs. This ability to use other national markets to ease the strain on the U.S. system is not always fully appreciated by the more dogmatic Keynesians.

Wealth effect.

Sure, folks have gotten richer in the stock market. Maybe they're going to start getting a little looser with their cash, allowing prices to start edging higher as consumers become more relaxed about cash. If that were so, how come California -- surely one of the great reservoirs of stock-market-generated wealth -- is up in arms over rising gasoline prices? Government investigations, protests and political outcry are greeting this bump up in gas prices. That doesn't sound like a quiescent, too-rich public.

NBA/NFL factor.

Professional basketball players finally have a true salary cap, which should put an end to those out-of-control salaries. The

New England Patriots

turned down a HUGE offer to go to Connecticut. Frugality reigns, another knock against inflation.

Veblen impact.

Journalists are getting paid too well, especially in the financial sector. Therefore, they presume, everyone must be getting paid too well. Hence, they are projecting their own good fortune onto the things they cover (typical) and starting to wonder if it's all gone too far. Journalists are like that. But the fact is that a lot of this nation continues to struggle along in search of the great riches that are supposedly everywhere. Presidential candidates are stoking protectionist fires, especially in the steel industry. Farmers and those in commodity businesses are truly suffering. The fact is that a lot of people, especially in the non-tech, non-knowledge areas of the economy, are not benefiting as richly as conventional wisdom would indicate. This unevenness is another reason why the forces of inflation are not nearly as potent as some would have you think. (Ten-point bonus for knowing who



The Internet.

Finally, the revolutionary impact of the Internet on costs, prices and other inflationary issues remains ill-determined. Locked in post-war models, economists are struggling to explain why inflation has not exploded in this era of high employment and relatively decent growth. But think about things like


and other new find-the-lowest-price concepts that the Net has made available. Moreover, the Net makes for greater efficiencies both in the marketplace as well as in the workplace. Economists still have work to do in determining just how much of an impact the Net is having on inflation-anticipation measures.

Media notes:

Do dead-tree journalists ever get jealous of their online peers? I wonder. If you have any ideas about this, please send me an email. I'd love to do an item about that in a future column ... Midday wackiness. Finally listened to the

Dow Jones Boys



the other day. What is going on there? It's like

Alan Abelson

at lunch with all those puns...