It appears inflation is already rearing its ugly head. It is not a temporary problem. It looms on the horizon.
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http://www.boston.com/news/globe/editorial_opinion/oped/articles/2004/05/02/the_perilous_bush_recovery/<snip>
Bush is also atop an increasingly inflationary system -- in one sense confirming evidence of a recovery that is real, but one whose main elements are injurious to ordinary Americans. It is also a system where long-term interest rates are on the rise -- reflecting not only concern about more inflation, but also about the impact of astronomical budget and trade deficits and a low-valued dollar. Rich people have more juicy tax cuts to look forward to; ordinary Americans, their wages essentially flat, can expect an even tighter squeeze.
The country's economic geniuses regarded last week's news that the economy's output has been rising for nine consecutive months with a large yawn -- in part because the first quarter's increase in the total production of goods and services was up by less in the preliminary estimate than expected, in part because of some mildly disturbing results in output measurement.
Not the least of these involves inflation -- quiet since the tight money policies of former Federal Reserve chairman Paul Volcker wrung the wretched excess of the 1970s out of the system. The inflation part of the first quarter's gross domestic product was up an eyebrow-raising 3.2 percent, more than double the previous quarter's pace.
The government noted that roughly a third of a percentage point of the increase during the January-March period represented the modest increase in civilian and military pay legislated last year. The proper interpretation, however, is that inflation appears to be coming back, powered by increases in the cost of necessities. In addition, the business world is awash in comment from executives that pricing power is more and more with them.
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