Blips in some prices don't lead to higher inflation trends unless they get transferred into higher wage demands. With very high unemployment, weak unions (being weakened every day), and a low labor participation rate, wages aren't going to rise anytime soon. That's what US history tells us. http://en.wikipedia....Price/wage_spiral

Compare the USA numbers with Venezuela's or Argentina's or Russia's at BPP - http://bpp.mit.edu/daily-price-indexes/ Inflation in the US is not the problem. Lack of demand and high unemployment is the problem. Inflation is a problem in other countries due to particular features of their economies. Inflation is a problem in China (which isn't listed in the BPP), but if trade meant inflation transferred directly then I guess (by similar reasoning) that means we can expect 10% GDP growth in the US any day now... :-/

Oh, what else did Mr. Simon say during the interview? http://www.usatoday....eo-bill-simon.htm

Wal-Mart (WMT), which has had seven-consecutive quarters of sales declines in the U.S., erred in cutting back on the number of products it offers and getting away from its theme of everyday low prices, Simon says.

Costly remodels of stores made it difficult for Wal-Mart to lower prices as much or as often as it would have normally. These factors prompted customers to flee to competitors, Simon says.

Efforts to streamline its inventory by reducing the number of brands of, say, tools, also hit the company hard. Simon says customers who might have browsed for hardware on their once-diverse shelves stopped coming, so the store is bringing back the brands it dropped.

Yeah, inflation is Wal-Mart's problem - sales have fallen, they spent a boatload on store upgrades, and they reduced their product selection. But inflation in China is the problem. Sure. It's obvious that Wal-Mart will be hiking its prices by "serious" amounts any day now. Oooh. Scary.

If Wal-Mart wants to get customers back, they're going to eat any significant price increases from China.

"Inflation" is a convenient excuse for Simon to say that Wal-Mart's poor performance poor isn't his fault. That is all.

HTH.

Cheers,
Scott.

Um, you guys know better than this. Or should.

What was the inflation and unemployment rates at the start of that chart in 1973? 6.2% and 4.8% What was it in 1974? 11.0% and 5.5% What happened in those two years? The oil embargo during the 1973 Arab-Israeli war.

So, we had nearly full employment and fairly high inflation, then a quadrupling of oil prices (~$3 to ~$12 a barrel) in less than 2 years. Unemployment went up, and inflation increased from a fairly high level to an higher level. Unemployment increased because of the recession.

What happened in 1979? The Iranian Revolution and the Iraq-Iran war and another near tripling of oil prices (~$14/bbl to ~$40/bbl) - http://en.wikipedia....logy-june2007.gif .

This doesn't contradict anything I posted.

Has oil tripled or quadrupled in the last 2 years? Not exactly. Oil is down substantially from its peak ($145.31 on 7/3/2008) but up substantially from its recent low ($30.28 on 12/23/2008) - http://tonto.eia.doe...?n=PET&s=RWTC&f=D (What happened between July and December 2008? The world economy imploded.)

At the moment oil's at $104.34 (on 3/30/2011) - lower than it was less than 3 years ago. If oil's tripling since December 2008 were driving US inflation, then the 12-month CPI would be a lot higher than 2.1% - http://www.bls.gov/n...lease/cpi.nr0.htm . (The 12-month CPI in July 2008 was 5.6%.) Things are different now compared to the 1970s.

Are we at nearly full employment? No.

Do employees have strong labor contracts with automatic cost-of-living increases that will feed price shocks back into inflationary expectations? No.

Is US Capacity Utilization around 85% as it was in September 1973? No. Is it above 81% as it was in December 1980? No. It's 77% - a very low level.
http://www.data360.o...p_Id=51&count=all

The lessons from the 1970s tell us that we don't have to worry about inflation now. The economy is too weak for inflation to take hold.

HTH.

Cheers,
Scott.

Show me some graphs and numbers and maybe we'll talk.

All you've done thus far is point to excerpts of an interview with a CEO as proof that inflation is coming to the USA. When confronted with evidence that you're wrong, you make categorical statements without evidence and introduce side issues like the supposed decline in US manufacturing - http://en.wikipedia....tes#Manufacturing . By some measures, US manufacturing is still very strong: "The U.S. produces approximately 21% of the world's manufacturing output, a number which has remained unchanged for the last 40 years."

Show me that I'm wrong.

Maybe take a look at this and get back to me - http://www.google.co...yvuIdVTlA&cad=rja (especially pages 19 - 23 and Figure 13). Stock and Watson say US inflation is likely to continue to trend downward until employment picks up substantially. How are they wrong, too?

Thanks.

Cheers,
Scott.

Monthly inflation numbers are noisy. The numbers the last 2 years have been especially noisy. That's why I cited the 12-month numbers in my post above - http://iwt.mikevital....iwt?postid=44358 . 2.1% CPI inflation over 12 months isn't anything to be upset about - especially with very high unemployment.

But if you want to worry about that, and cherry-pick monthly numbers to support your case, feel free.

Consumers don't pay PPI increases, businesses do. Personal Consumption Expenditures are 70% of GDP - http://www.bea.gov/s.../0311_gdpecon.pdf PCE includes services. PCE and CPI use slightly different formulas, so their changes aren't identical. http://www.bea.gov/s...r/1107_cpipce.pdf

HTH. I think I'm done.

Cheers,
Scott.