Matthew Yglesias does such a scintillating job of eviscerating Michael Kinsley's bizarre hyperinflation hyperventilation in the April issue of The Atlantic that it would be unsportsmanlike to pile on and offer my own line-by-line exegesis of his confounding nervous-nellyism. I'll just note that it requires some very clever rhetoric to explain how you can't sleep at night because of your inflation fears, even as you acknowledge that there is no evidence that your nightmare is something to worry about right now, and all the economists you respect don't see it as a significant problem. Kinsley is a heck of a writer, but he's not that good.
The timing of the piece's online publication could not be worse. On Wednesday, the Bureau of Labor Statistics released the Producer Price Index, which shows prices for finished goods (not including food and energy) inching up at 0.1 percent rate. If you add food and energy into the mix, falling gas prices actually pushed the index down by 0.6 percent. As Ryan Avent notes, with the help of a nice chart, the chances for deflation seem at least as likely as inflation.
Also today, the Obama administration released a joint statement by three top Obama economic officials, Peter Orzag, Timothy Geithner, and Christina Romer, laying out the administration's economic forecast. Because of "the high levels of slack in the economy," the "Troika" projects inflation of "1.0 percent in 2010, 1.4 percent in 2011, and 1.7 percent in 2012." Hyperinflation, this is not.
High levels of slack refer to high unemployment -- which the administration projects as still hovering around 8 percent by 2012 -- and other attributes of a weakly recovering economy. It will be quite some time before we are worrying about low levels of slack and economic overheating. The Fed, which is fully stocked with relentless inflation-fighters who will immediately start raising interest rates the moment they sniff the slightest tendril of inflationary smoke, sees nothing in the current economic landscape to worry about. The Dow Jones Industrial Average closed at a 17-month high on Wednesday, in part, according to some market watchers, because the lack of inflationary warning signs ensures that the Fed will keep rates at rock-bottom for the foreseeable future.
Which reminds me of a completely different subject. Remember Donald Luskin's "unified rightwing crackpot theory of the stockmarket" declaring that the market's long rally from its lows last March "tracked the demise" of the Obama administration's policy initiatives, and blamed the post -Scott Brown downturn on a fear of anti-Wall Street populism? I'm waiting for his explanation of today's 17-month high, at a point where it looks like health care reform, once again, may actually pass. Though I'm not counting any chickens.