Producer Price Report Is No Harbinger of Higher Inflation

The sharp rise in producer prices reported on Tuesday - 1.8 percent in November, more than twice as much as economists expected - may renew fears among commentators who insist that rampant inflation is around the corner and that paper money will soon be worthless. Odds are, however, that it does not herald persistently higher prices.

Traders seemed to reach the same conclusion. The dollar fell against the euro immediately after the report was released but then reversed course, rising to its highest level in more than two months.

The investment bank BNP Paribas pointed out in a note issued after the report was released that businesses have had trouble passing their higher input costs on to consumers. That was confirmed Tuesday in the latest Empire survey of manufacturing conditions in New York. The survey, issued by the New York Federal Reserve Bank, showed that manufacturers have been able to recoup only a portion of the price increases imposed on them by suppliers.

The hyperinflationistas always obsess over the massive federal borrowing used to stimulate the economy, but they ignore all the wealth that has been destroyed in recent years by collapsing asset prices, as well as the fact that much of the stimulus money has already come and gone. If there is a flation in our future, it's more likely to be de than in.