Where's Inflation?

One reason financial advisors have said that people should own stocks is that the expected gains would keep them ahead of inflation.

In other words, inflation would "eat up" the paltry returns of a typical savings account.

Besides showing faith in the future of the stock market, this expectation of inflation has been a given for decades.

Yet, the March 2014 Elliott Wave Theorist said:

The next big monetary event will not be more inflation but deflation.

This Theorist statement was made despite the Fed's unprecedented inflation efforts, which had begun around the time of the Great Recession.

Indeed, since that Theorist statement, inflation has largely been absent. Here are a couple of headlines:

  • Why There's No Inflation Despite Trillions of Fed Dollars (, April 7, 2015)
  • U.S. Inflation Remains Low, and That's a Problem (The New York Times, July 24, 2017)

And, now we have a March 7 CNBC article titled, "The Fed doesn't have to worry about high inflation anymore, and that's a problem." Here's an excerpt:

There was a time not so long ago that defeating inflation would have been considered a huge victory for the Federal Reserve. No more: The lack of price and wage pressures in the economy these days is perhaps the central bank's biggest failing.

For those around in the 1970s and early '80s, runaway inflation was the single biggest threat to American prosperity. It was so bad that then-Fed Chairman Paul Volcker deliberately pulled the country into recession in order to defeat runaway prices.

Nowadays, the exact opposite is true. While Americans will still complain about the prices they pay at the grocery store and gas pump, real inflation as economists define it hasn't been around for pretty much all of the 21st century.

In fact, Fed officials are concerned enough about the lack of inflation that they will be examining it closely this year as part of a broader look at how they execute policy and convey their actions to the public.

"It's an acute failure on the Fed's part," said... a former top aide to ex-Dallas Fed President Richard Fisher. "They have generated inflation, just not where it's needed."

Where policymakers would like to see inflation is in areas like wages so workers can improve their standard of living, and even some discretionary consumer goods so companies can have pricing power. While paychecks have been growing more strongly of late, and there is some evidence of price pressures, the Fed's preferred inflation gauge has remained stubbornly below the central bank's 2 percent goal for the most of the economic recovery that began in mid-2009.

You can read the entire article by following the link below: