Inflation? What inflation?
Expectations are rising…
HT: Greg Mankiw
This is a tremendously misleading graph. I suggest that you put the y-axis scale a 0 – 20% and choose 1972 – today for the x-axis.
Then you can keep the comment: “Inflation. What Inflation?”
So if New York City had a sudden surge in crime, we should put that up against the stats of the 1970s, and say, “Well, it’s not much of an increase today, compared to how it used to be”? That’s your argument.
Just because “things used to be worse” does not excuse a bad situation today. Inflation is above Bernanke’s own target zone, yet he says nothing now that he’s turned politician.
Fair point, Perry. I did math before economics and I am always a bit disturbed by financial and economics charts’ truncating their y-axes (like this one).
Yes, it better shows the motion, but it amplifies it. I’m pointing out that the entire range here is about a third of a percent — and this is an expectations chart which would be even more volatile. In any kind of historical context, a cyclical fluctuation of 0.35% over 13 months just does not scream catastrophe.
Forgive me for posting an oppinion when I am not a Harvard student myself. I just thought the discussion is interesting and I am currently reading Mr. Mankiw’s textbook, so I thought I could share my thoughts. I agree with jk. The graph does amplify the volatility of expectations. I don’t think the stability part of the dual mandate is at all violated by a mear 1/3 of a percentage point fluctuation. Furthermore, with this graph we see that the situation now is no different than it was last year – the hight and number of peaks seems unchanged.
Fill in your details below or click an icon to log in:
You are commenting using your WordPress.com account. ( Log Out / Change )
You are commenting using your Twitter account. ( Log Out / Change )
You are commenting using your Facebook account. ( Log Out / Change )
You are commenting using your Google+ account. ( Log Out / Change )
Connecting to %s
Notify me of new comments via email.