Star economist and doomsayer Nouriel Roubini thinks inflation’s coming, and it’ll be a big 1970s-style problem. Star investor John Paulson sees it right around the corner and thinks he can make money on it. Bond king Bill Gross has flipped and flopped and again flipped on it. Historian Niall Ferguson believes it will last for years, and there’s nothing we can do about it. New York Times columnist Paul Krugman thinks inflation is a much less pressing danger to the economy than the anti-inflation hawks. Uber-investor George Soros thinks that so many other people are worried about inflation that he’s betting on a bubble in gold driven by inflation fear.
Inflation may be running now at a rate of 2 percent a year—as low as it’s been since the mid-1990s (and before that, the early 1960s)—but investors and pundits are already in the throes of a full-scale inflation war. It’s a raging debate about where the economy is heading—and maybe about how we can stop it from getting there.
We’ve been conditioned to divide economic forecasters into the “bulls,” who think the economy will boom, and the “bears,” who think it will crash. But this is a new kind of battle. Call it “Bear vs. Bear.” It’s between two kinds of worriers: One group thinks that we’re headed for an extended period of inflation, and another that believes we’re a lot more likely to have a deflationary double-dip recession.