VodkaPundit

Your Wednesday Afternoon Dose of Doom & Gloom

Brace yourself:

With growth indicators improving and the Federal Reserve about to ease back on its monthly stimulus program, market talk is intensifying that inflation will arrive in earnest in 2014.

In fact, even if actual inflation does not escalate, the fear of it could be enough to provide a pretty substantial shock to the system.

That’s a scenario envisioned by Jim Paulsen, chief market strategist at Wells Capital Management, who sees “stronger economic growth,” declining unemployment and rising factory utilization leading to “a modest rise in the U.S. inflation rate” that will produce “the first ‘inflation scare/overheat/can the Fed exit fast enough’ panic of the recovery.”

This is what I’ve been warning of for years now, but one thing is left out of this story.

At first, inflation feels good. Wages are going up which makes workers happy. Prices are going up which makes sellers happy. Profits are going up which makes producers happy. And GDP is going up which makes Washington happy.

Of course it’s all one big illusion built on funny money — a bubble, if you will. One Ben Bernanke has been trying desperately to reinflate (he’s no Greenspan), and which I have every faith Janet Yellen will reinflate. And given Yellen’s “feel good” policies, I suspect Paulsen’s panic taper fears are overblown.

So don’t worry about the Feds raising the minimum wage to $15. The doves are taking over the Fed, so what you should really worry about is the $15 Big Mac — before you get the Coke & fries with that.