The contrarians tend to yell loudest when markets run into trouble. Sometimes they're right and they make fortunes, with reputations to match. Much of the time, however, that doesn't happen. Instead of riches, what's left is a track record of mediocrity or losses. 

The market turmoil during the coronavirus pandemic is no different. This time it's the reappearance of those peddling dire predictions of raging inflation.

I just don’t see it.

The conditions that typically cause a spike in the consumer price index are simply not present: Inflation occurs when prices rise because of increasing production costs amid higher prices for raw materials or wages. Another is when consumers become willing to pay more for goods and services, perhaps because they have more money after monetary easing or fiscal stimulus.

The conditions today are the very opposite of what typically causes inflation. There has been a stunning decline in consumer demand, a collapse in energy prices and a plunge in discretionary spending.

The money recently injected into the economy by Congress and the Federal Reserve doesn't make up for the earnings power that's been destroyed. And no one should make the mistake of extrapolating price increases for a few items, such as toilet paper or sanitary wipes, for broader inflation. That's just microeconomics at work, balancing supply and temporarily elevated demand.

Let's go back to the last time the inflation hand-wringers showed up, after the financial crisis of 2008-09. The warnings came loud and furious. And it wasn't just inflation that was a threat, but ruinous, Weimar Republic-style hyperinflation. One of best examples of this can be found here.

Not only were these folks wrong, they were profoundly and fundamentally wrong, demonstrating a deep misunderstanding of how economies function.

Similar alarms are now being sounded.

Consider Tim Congdon, chairman of the Institute of International Monetary Research at the University of Buckingham, England. He warns that “the Federal Reserve has poured money into the economy at the fastest rate in the past 200 years . . . history suggests the U.S. will soon see an inflation boom.”

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