I’m glad to see Greg Mankiw agreeing with me on the absence of any inflation risk in the current environment. Maybe he should have a word with everyone else in his party.

Here’s another way to think about the issue. As you can see above, wages have gone nowhere. Commodity prices, on the other hand, have gone up a lot lately (although they crashed last week).

So here are a couple of questions.

First, do you see any sign that workers are about to (or are even able to) demand higher wages to compensate for the higher prices of gas and food?

Second, do you any sign that employers are getting ready to make more generous wage offers?

Third, have you heard anything about companies feeling that they have room to raise prices by substantially more than the rise in their raw material costs?

The answer to all three questions is clearly no. So what we have is a rise in raw material prices, which will largely get passed on the consumers, but no hint that this is spreading into a wider rise in prices; and with labor costs flat, that means we get a one-time jump in consumer prices, but no persistent rise in inflation.

If you want to insist otherwise, you have to tell me how this is supposed to work. And I haven’t heard any coherent explanations to that effect.