Recently a lot of the talking heads around the beltway have been preaching about the looming specter of inflation. Personally, I don’t see what all the commotion is about. It seems like the threat of run away inflation is more of an interesting topic of conversation, than a real problem. People spend hours discussing all the different indicators that may or may not signify that inflation is on its way. Most recently food and oil prices have been showing signs of inflation. However, the alarmists don’t point out that all other important indicators are barely growing at all and surges in oil and food prices historically tend to be short-lived. People talk about how scared and uncertain the market is about inflation, yet one needs to look no further than Federal Fund Futures trading at 2.25% to see that the market knows what is going to happen. Rising interest rates will counter any sign of possible inflation. In the United States we have a central bank, headed by Alan Greenspan with the power to slow down inflation by raising interest rates. Further more, the Central Bank’s decisions are made with the prevailing attitudes of the market in mind. In other words, the Federal Reserve doesn’t like to rock the boat for fear of catching the market off guard. The market is not half as scared of what Alan Greenspan will do, as he is of what the Market will do. So you shouldn’t be too worried about inflation since with proper moderate policy, there won’t be significant inflation to begin with. Besides, just a few months ago, the hot topic was Deflation, and you can only have it one way or the other. Who knows what the source of anxiety will be next month, but I am sure it will be something else.