There's been a sort of rough consensus among American, British, and ECB central bankers about what levels of inflation are acceptable. Suddenly, however, we're looking like the profligate wastrels on M1 Street. Even during the big German and French slowdown, and the Italian recession (these are Europe's three biggest economies), the ECB held a hard line on inflation. Britain, too, has kept interest rates quite, er, bracing. Right now, the Bank of England is holding stat despite growth worries, and the ECB is talking about a rise next month. Bernanke, on the other hand, is tolerating quite a bit of core inflation in order to stave off recession.

It's rather a delicate question of monetary policy. The inflationary seventies gave rise the the conviction in the 1980s and 1990s that only an iron fist on the throat of inflationary expectations could hold back the beast. But Japan's experience proved that inflation isn't the worst thing in the world, and since the 1990's, the US has been inching towards more focus on growth. In a couple of years, we'll be able to look at US inflation and growth and see whether Bernanke managed to skirt recession without any worrying entrenchment of inflationary expectations, or rekindled an inflationary sentiment that will have to be ruthlessly and painfully extinguished.

Right now, all we--and the central bankers--can really do is try not to bite our fingernails all the way down to the quick.

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