Sadness

Kash at Street Light has a good Post on the falling (at least temporarily) rate of Inflation. It is not simply Oil pricing going down, but other basic materials dropping somewhat. A serious Problem establishes for the Fed at this point; almost all Economists would call for a downshift of the rates by some base points. I would hesitate at that. It would stimulate Christmas Shopping, but in an unacceptable way, as Americans begin to pay down their Consumer Debt. It will not spur Business activity to great degree, as Construction slows naturally during the winter months, and Retailers will be slow to reorder until the Profitability of the Christmas Season is accounted after January Sales. Quick revision of the Interest rates will artificially pressure Inflation upward, without real capacity to generate economic activity. I would wait to revise the base rates until possibly March.

Ritholtz at Big Picture provides a good assessment, alleging that BLS estimates function more to limit the excessive COLA giveaways, than they are effective evaluations of Inflation pressures in the economy. BLS estimates do not provide year over year data which remains a primary discretionary factor in Inflation study. This is even more reason for the Fed to hold on current Rates, for Inflation likely only needs fuel to roar ahead.

Russell Roberts provides an excellent article on the use of Comparative Advantage, coming by way Tim Schilling. The story expresses clearly the gains to be made, not simply by Specialization, but by concentration of effort. The moral of the story resides in the fact, that with intelligent analysis, even simple elements of Trade can provide betterment of the condition of the entire polity.

The real economic story today was the death of Milton Friedman at age 94. Samuel Brittan in the Financial Times has a very good article on his life and work. What did he mean to myself? I never watched him on television, and read markedly few of his books; yet, I think he propelled most of my interest in economics, as much to prove him wrong as anything. A very hard thing to do! I once heard he referred to me as a ‘demagogue’, though I have my doubts as to whether he had ever heard of me. I will miss him terribly. lgl