Talking down inflation--markets not buying.(The Economy)(Viewpoint essay)

ABA Banking Journal, April, 2008 by Aleman, Eugenio J.

ALL THOSE "IMPORTANT" AND "famous" economists that have been arguing for almost a year that inflation was not a problem for the U.S. economy seem to have changed their minds in the last few weeks; talk about being "data driven!" The basic problem of being a data-driven economist is that you lose the big picture and forget about the essentials of economic theory.

However, those economists that derive their analysis from sound economic theory saw this coming for a long time, even though we were dismissed. We know that what the Federal Reserve is doing in this commodity price environment is very, very, very risky.

So far, Ben Bernanke and his followers have been very lucky, to say the least. Why? Because inflation expectations have remained well...

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