Putative inflation, as measured by standard methods, remains muted. But I use the term ‘putative’ (“supposed”) advisedly. As I have noted before, if you want to know what inflation is doing, ask the lady of the house, or the one who actually spends the money on a day-to-day basis, to see where and how far it goes. Inflation is far from muted on that basis. My wife and I were a bit dumbstruck, for instance, by a notice from the TD Bank (and Aeroplan) that the cost of using those reward miles has just shot up by a stunning 20%. It is a safe bet that credit card awards do not show up in the inflation statistics but virtually everyone with a credit card gets credit card points awards and they are worth a lot less now. The keepers of the sacred statistics may tell us one thing, but the grocery store tells us quite another. And so – it thus justified – interest rates should remain ultra-low, but the prime beneficiaries of low rates are the governments whose balance sheets remain in an horrific condition. And, please observe, those who are arguing forcefully that rates should not be raised by Yellen & Co. continue to be the agents of governments everywhere, starting with Christine Lagarde, managing director of the IMF, who sees – all too clearly – just how weak the balance sheets are of the vast majority of [European] governments.
So…no inflation? In your dreams.