SUMMARY

  • Why Is Inflation So Low?
  • The Incredible American Job Machine
  • China’s Bad Loans Are Getting Worse

According to Oscar Wilde, cynics are people who know the price of everything and the value of nothing. On a related note, I am beginning to suspect economists are people who know nothing about prices. Trends in the price level have confounded analysts and central bankers for a few years now, making it difficult to set economic policy.

Only a generation ago, inflation in developed countries raged at rates that would be unacceptable in emerging markets today. Today’s inflation rates have been deemed unacceptably low, and have proved relatively unresponsive to tight labor markets and easy monetary conditions. What’s going on? The answer has several layers.