Inflation?

The media and some economists have jumped on Tuesday's report that the Producer Price Index jumped by 1.7% in October as evidence of a resurgence in inflation. The increase was the largest since 1990, and was due to large increases in energy and food.

"A period of pretty tranquil inflation has passed -- with a vengeance," said economist Ken Mayland, president of ClearView Economics.

It sounds like some people may be mistaking temporary price increases in certain sectors for overall inflation. The increase in the PPI is largely due to increases in energy and food costs, which can be attributed reduced supplies and uncertainty caused by global conflicts and recent hurricanes.

Inflation, according to Milton Friedman, is "everywhere and always a monetary phenomenon." That is, it is an increase in the money supply that unmatched by additional production of goods and services to "soak up" the excess money. To put it another way, true inflation is "too much money chasing too few goods."

As supplies in the energy and food sectors stabilize and economic growth continues to rebound, it is likely that the recent upsurge in "inflation" will take care of itself, particularly in light of recent Fed's moves to remove excess money by raising interest rates. When that happens, it'll be interesting to see if it makes the front pages of the nation's newspapers.