As if we don't have enough trouble to worry about these days, some financial pundits have raised the idea that we are due for a bout of rampant, Seventies-style inflation. The fear arises out of the fact that the government's heavy deficit spending, which the Obama administration felt necessary to pursue with its stimulus package, could end up devaluing the dollar by pumping so many more of them into the economy.
But recent figures show no such thing happening. In fact, on Tuesday, the Producer Price Index - the government's way of tracking wholesale prices - showed a jump of just 0.2 percent in May. So for now, economists don't see inflation looming in the near term. Today the government releases the Consumer Price Index, the measure of how much you and I pay for groceries and gasoline. Even though oil prices have been rising, food prices have been slipping a bit, so this measure probably won't show much threat of inflation either.
The real problem with inflation will come, if it does, when the economy snaps back to life. If the government is still pouring lots of deficit-spending dollars into the economy at that point, there's a chance that the economy could overheat and we might enter an inflationary period. But by definition, that would mean the recession had ended - and by that point, a little inflation might not look so bad.
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