Friday, May 14, 2004

An angle on the inflation story you don't hear much is the end of import price deflation. Since October 2003 non-petroleum import prices have surged at a 4.5% annualized rate. Compare this to the six months prior to that during which annualized non-petroleum import prices grew a scant 0.2%. Non-petroleum import price inflation was nonexistent throughout all of 2002 as well, and 2001 saw dramatic deflation to the tune of -5.4%. Is global overproduction finished? Or will the end of the era of cheap money return us to the status quo ante? Being a deflationista at heart, the General is inclined to the latter interpretation, but I'm willing to entertain other scenarios.

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