Whatever happened to inflation? It used to be economic enemy number one. But, now, it barely gets a mention.

Even the cost-of-living crisis – which you might think is all about inflation – is usually discussed in terms of wage stagnation and supply constraints. The old Monetarist dictum, that inflation is ‘always and everywhere a monetary phenomenon’, is largely ignored.

Furthermore, through the money-printing practice of quantitative easing, the current and previous governments have gone out of their way to provoke concerns – but even the Tory right hasn’t managed more than the occasional hurrumph.

It’s a bit different in America, where, according to a James Pethokoukis piece for the American Enterprise Institute, the right is obsessed with inflation:

“For more than five years, many Republicans and conservatives have warned that catastrophe is nigh. Washington’s deficit spending and the Federal Reserve’s excessive money printing will lead to a financial crisis worse than the Great Recession, they prophesied. Inflation will skyrocket, the dollar will collapse, and the Chinese will dump treasuries, they swore.”

But despite all that monetary looseness, the great inflation disaster has yet to materialise:

“…the Next Great Inflation never happened. The Consumer Price Index, including food and energy, has risen by an annual average of just 1.6 percent since 2008, below the Fed’s 2 percent inflation target. During the Great Inflation of the 1970s and early 1980s, by contrast, prices rose five times faster.”

The hawks are in such a flap over the failure of their prophecies that they’ve taken to imagining inflation that isn’t there:

“Some Republicans and conservatives now argue that Washington is figuring inflation all wrong, maybe even intentionally. Better, they say, to trust independent outside sources such as the website ShadowStats, which “exposes and analyzes flaws” in government economic data. According to one set of ShadowStats calculations, the true inflation rate is nearly 10 percent today. The inflation truth is out there.”

Of course, we do live in strange times in which some goods and services – especially information-based products – are tumbling in price (sometimes to the point of becoming free), while others (such as those dependent on the oil price) have undoubtedly become more expensive. Trying to average out such a confused picture is bound to be a contentions matter. Nevertheless, the idea that the ‘shadow’ inflation figure is anything as bad as the doomsayers suggest just doesn’t accord with reality:

“If inflation were really 10 percent, that would mean the real economy, adjusted for inflation, has been sharply shrinking — yet somehow still adding 2 million net new jobs a year.”

Pethokoukis goes on to compare American economic policy – which cares about jobs but not so much much about inflation – with that of that of the Eurozone, where the opposite applies:

“Unlike the Fed, the inflation-phobic European Central Bank sat on its hands despite weak growth. The result has been an unemployment rate nearly twice America’s and a nasty double-dip recession. Of course, inflation is lower than in America — so low, in fact, that the region risks a dangerous deflationary spiral of falling prices and falling wages.”

A mischievous individual could even draw an intriguing, if somewhat simplistic, contrast between a Keynesian America and a Monetarist EU.

However, there is a third option that Pethokoukis doesn’t mention – that of British economic policy, which is making good progress in eliminating the deficit and creating private sector jobs, while growing faster than both America and the EU.

We must be doing something right.