Saturday, February 20, 2010


Surprisingly Close Agreement Between Rowley and Murphy

[UPDATE below.]

The well-read von Pepe has been sending me links from Charles Rowley. I will have more to say on them in the future, but this one on stagflation got me excited. At first I was very pleased that Rowley's arguments were so similar to my own. But then I got a little concerned.

Here's an excerpt from my Washington Times op ed of February 19:
Prices rose 2.7 percent during 2009, according to the Bureau of Labor Statistics' recent update of the Consumer Price Index (CPI). This is a worrisome fact because last year's unemployment rate averaged more than 9 percent. This trend may signal a return of "stagflation," a merger of stagnation and inflation.
To underscore that the U.S. economy has not been in deflation for some time, consider this: In the past decade, there were five years in which prices rose less than they did just last year. Does that sound as if the U.S. is still balanced on the edge of a deflationary cliff?
Some readers may remember the "misery index," the sum of the unemployment and inflation rates. The official unemployment rate in 2009 averaged 9.3 percent, for a total misery-index rating of 12.0. This is the highest misery rating in 26 years, going all the way back to 1983 when it was 13.4.
Compare with Rowley's blog post on February 20, the very next day:
For the time being the world sleeps, as money exerts its slow influence in the manner identified by Milton Friedman. First, monetary expansion will impact on real output, as already is the case. Then it will impact on the price level, slowly at first, but then with increasing venom. The first signs are already evident: the CPI rose 2.7 per cent in 2009, according to the recent update by the Bureau of Labor Statistics, and it did so against a backcloth of 9.3 per cent unemployment. This is a first green shoot of stagflation. A 2.7 per cent rate of price inflation is above the rate achieved in 5 out of the past 10 years in the United States. It does not signify a nation teetering on the edge of deflation.

Do you still remember the Misery Index that became such a central feature of economic evaluations during the stagflation era? This Index is the sum of the unemployment and the inflation rates at any point in time. In 2009, the Misery Index is measured at 12.0. This is the highest level of the index over the past 26 years, going right back to 1983, when it was 13.4, immediately before Paul Volcker’s monetary refrigerator conquered inflationary expectations.
OK not a smoking gun, I grant you. And I don't even believe in intellectual property; I don't own the idea of looking at the last decade to see how many years CPI rose less than in 2009.

But I'm not exactly a household name, Mr. Rowley. If indeed you had read my op ed before writing your own post, how 'bout a little something for the effort?

UPDATE: Actually there is a smoking gun. Rowley's post came out on February 20, when the BLS the day before had registered the January price level.

So in my op ed, I refer to the 2.7% CPI increase during 2009 as due to the "recent" release from the BLS, but that was because I actually wrote the first draft of that op ed in late January. It just took a long time for my colleagues at PRI to vet it etc., and then place it in a newspaper.

So I'm pretty sure that's conclusive heavy lifting of my piece, right?

Like I said, no big deal, I'm glad Rowley liked my points. There's no "I" in Internet.

Nor, apparently, is there an "ern et" in Internet.

(Get it? "Earn it"? Ha ha?)
I once remember a guy on Colbert saying that "there's no I in racism", which I thought was pretty great.
@ Bob "Perry Mason" Murphy.

We have a confession!

Rowley has now added this at the bottom of his post:

* These statistics were reported by Robert Murphy in The Washington Times (February 19, 2010). The monetarist interpetation of these developments is my responsibility. I am usually careful to cite sources. In my initial posting of the column, I regretfully overlooked the source of these statistics, believing that they had been published in an unnamed Editorial. I am now rectifying that omission.
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