Sense on Cents

Inflation is dead, right?

If we believe The Wall Street Journal, all we had to do was read yesterday’s edition to learn this fact. The WSJ wrote, Inflation is Dead? Long Live Long-Term Treasurys:

The Treasury Department is selling $118 billion in debt this week, just as Congress tackled a $940 billion health-care bill over the weekend, shining the spotlight on the U.S.’s hefty fiscal commitments.

Budget-deficit and debt levels are forecast to worsen: Total deficits including interest costs are set to remain above $1 trillion in the next decade, according to Barclays Capital. But longer-dated U.S. government debt is as popular as ever, even at the measly 3.689% and 4.580% yields that 10- and 30-year Treasurys are paying, respectively.

That popularity is supported by a single, compelling economic fact: Inflation is dead.

There you go. The WSJ said it, so it must be right. The policy wonks in Washington continually repeat it, so they must be right, too. Or are they? (more…)