Is a Nonseasonally Adjusted Median CPI a Useful Signal of Trend Inflation?
November 5, 2015 5:00am by
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Inflation is pretty much driven by ‘real’ government spending. When real government spending is high, so is inflation. The biggest inflation booms in the 20th century came from WWI/WWII/ColdWar,Nam/Carter,Reagan military spending revival of the 80’s. The “great inflation” of 68-82 happened because real government spending went nuts in the 60’s and then leveled off in the 70’s. If it would have declined, so would have inflation.
The big difference for the higher inflation in the 70’s than the 80’s was tighter monetary control, yet inflation stayed elevated until the cold war ended and the true drop in real government spending happened. If real government spending had stayed at the level in 2009-10 and stayed at the same rate, inflation would have happened.
“Inflation is pretty much driven by ‘real’ government spending.”
Sounds like bullshit — some correlation if the right time frame is chosen but no empirically supported causal mechanism and, eo ipso, no computational model much less a predictive one — but there are a few rational characters scattered among the many anti-government cranks out there so give us a link or two and we’ll see what we’ve got here.