Meltzer in May 2009:
When will it [inflation] come? Surely not right away. But sooner or later, we will see the Fed, under pressure from Congress, the administration and business; try to prevent interest rates from increasing. The proponents of lower rates will point to the unemployment numbers and the slow recovery. That’s why the Fed must start to demonstrate the kind of courage and independence it has not recently shown.
Milton Friedman often said that “inflation was always and everywhere a monetary phenomenon.” The members of the Federal Reserve seem to dismiss this theory because they concentrate excessively on the near term and almost never discuss the medium- and long-term consequences of their actions. That’s a big error. They need to think past current political pressures and unemployment rates. For the next few years, they cannot neglect rising inflation.
Meltzer in May 2014:
Inflation is in our future. Food prices are leading off, as they did in the mid-1960s before the “stagflation” of the 1970s. Other prices will follow.
Paul Krugman says it´s prejudice, and puts up a version of the following chart:
Brad Delong says Meltzer is astonishingly unprofessional.
But maybe it´s neither, with Meltzer concentrating on the wrong measure of the money supply.
Here we see why, despite Meltzer´s 5 year long forecast of “inflation is just around the corner”, inflation is dormant.
The charts show:
- Broad money is well below trend
- Broad money growth is anemic
The result is the parsimonious growth in NGDP with inflation remaining well below target.