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Another Dole bites the dust
Conservatives give the post-mortem on the Elizabeth Dole presidential campaign.
By Jake Tapper
[10/20/99]

Is Hatfield the real McCoy?
Under attack, the author of a new George W. Bush bio lies low while its editor takes the hard questions -- and stands by the drug-arrest allegation.
By Craig Offman and Daryl Lindsey
[10/20/99]

Money talks, reform walks
The McCain-Feingold campaign-finance bill died in the Senate on Tuesday. Again.
By Jake Tapper
[10/19/99]

The end of a nightmare
After her husband was killed in Chile's bloody coup, Joyce Horman thought the only justice would come from telling her story. Now she has reason to hope those responsible will be forced to face the truth.
By Itay Hod
[10/19/99]

Back to the eve of destruction?
Senate GOP leaders have endangered us all by their foolish rejection of the test-ban treaty.
By Joe Conason
[10/19/99]

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But let's take the long view, here. This puts the price of gas back where it was during the Gulf War. Or, if you want to take the really long view, back where it was in 1967, before the Vietnam War sent prices surging.

And that's exactly what the folks over at the Federal Reserve Board should be thinking about when they contemplate the potential evils of inflation in this economy. If they do, they will no doubt conclude that inflation is still well within a tolerable range.

This week's inflation report showed prices rising at a 2.6 percent annual clip, up nearly a full percentage point from a year ago. But what was happening a year ago?

Many of the East Asian countries had just watched their currencies collapse in global financial markets, sending their local economies over a cliff.

The result was a sharp plunge in the price of oil, copper, imported parts and other industrial commodities, since what were once called the "Tiger economies" suddenly had to severely curtail their demand.

U.S. business had a field day scarfing up these critical resource inputs at unrealistically low levels. That, in turn, provided low prices for consumers around the world, and higher profits for business -- the best of all possible worlds, unless, of course, you happened to be an Indonesian laborer in a shoe factory.

Which reminds us of the other big benefit for consumers in the rich world from last year's already forgotten global financial crisis. When currencies plunged, so did the price of local labor, as measured by the global market. To the extent that consumers in the developing world purchased foreign-made goods, they suddenly became poorer in real as well as in relative terms.

But the suffering of local peasants turned day laborers in the global economy has been good news for Circuit City shoppers here, because the prices of VCRs, television sets, stereos and cellular phones -- many of which are assembled in China, Malaysia, Indonesia or Mexico -- have gone down.

More than one economist has likened the series of currency collapses that occurred among some of our larger trading partners to a massive tax cut for U.S. consumers.

But now East Asia is on the mend, and these one-time effects from the crisis of '98 are gone. So does a return to slightly higher annual price increases mean the dreaded beast of inflation is back?

For Fed officials and aging Baby Boomers who remember the 1970s as more than the age of disco, inflation raging out of control is truly something to be feared, of course.

Fortunately, there's very little evidence from the latest inflation report that rising prices are about to become a serious problem for this economy. "Inflation is not coming back in any significant way," flatly states Stephen Roach, chief economist at Morgan Stanley & Co.

Indeed, if you remove the volatile energy and food prices, which are now returning to pre-crisis levels, the overall inflation rate over the past 12 months has been just 1.9 percent.

Even the much-dreaded cost of medical care, which has been the most consistently inflationary item in most household budgets for a while now, rose at just a 3.4 percent clip over the past year. While that is higher than most other items in the index, it is still far below the double digit health care increases we experienced in the late 1980s.

Major contributors to last month's jump in prices were the rising costs of transportation (at 0.6 percent) and apparel (at 1.2 percent). But the long view is again in order here.

Over the last decade, the cost of transportation, which includes oil, has gone up just 29 percent, an annual inflation rate comfortably within the 2-3 percent range.

Clothing prices have risen less than 10 percent in the decade, and if one uses 1991 rather than 1989 as the comparison point, apparel costs have not risen a dime.

Next page | But what about the high-growth sectors?