While Janet Yellen and others lament the death of the Phillips Curve, the greatest inflationary episode in history continues to paint the data. To be sure, a day after Yellen suggested that subdued inflation readings are a ‘mystery’, the Federal Reserve released their quarterly Financial Accounts of the United States. In the Fed’s report 2Q17 Net Worth jumped by $1.65 trillion on a sequential basis and is up by $8.1 trillion over the last year.
The current boom is 34-quarters old, meaning we are less than 4-quarters away from surpassing the duration of the great 1990s boom. The current period has produced more than $24 trillion when compared to the 1990s boom during its first 34-quarters. Remarkable!
While the Fed searches for a reason to raise interest rates in the face of lower than expected gains in consumer prices, one question deserves to be asked: when was the last time traditional inflationary forces were a problem in America? You could argue that since Volcker relentlessly attacked runaway ‘inflation’ in the early 80s there has only been a handful of inflationary scares and no real economic calamities as a direct result.
Now…ask another question: when was the last time an incredible period of asset price inflation led to an inevitable bust that almost blew up the entire financial system? Oh yeah, less than a decade ago…
Suffice to say, and even if their sleepless nights are kept secret, it is likely that Yellen and company are more than a little concerned about the current period of asset price inflation. Or, to be more specific, Fed members are concerned what may happen when the biggest boom in asset prices ever, ends.