How long have we been hearing that inflation is dead in the US?  How long have we seen reports of the CPI increasing only 0.1% or even 0% per month?  Aren't we hearing about how the biggest risk now is deflation?  It's been at least 10 to 15 years as far as I can remember.  I've been hearing that for about as far back as my house was 1/3 the value it was at its peak and milk was 1/4 the price.  It started at least when gas was $20 per barrel, before it spiked to $150.  Through all this, the CPI somehow managed to stay relatively stable.  And this is what employers used to justify little to no inflation adjustments to salaries.  How did this happen?

What happened was hidden inflation.  Through tricks, smoke and mirrors, and shell games, the inflation that actually happened in the US was hidden in artificially low interest rates and government-sponsored economic data showing little to no price increases (the "ex food and energy" trick).  How can any logical person say there was no inflation when 90% of consumer expenditures spiked in price?  Home prices, energy, metals and food prices all spiked from 2000 to 2008.  What "baskets" of goods actually remained flat in the decade to justify the tiny CPI numbers?  Computers?

So when I now hear about the risk of deflation, I realize that it is just part of the bubble popping.  Unfortunately, the inflation of the 2000's did not transfer to wages, but I fear that the deflation will.  What employer won't take advantage of the opportunity to lower salaries?  As long as the Bureau of Labor Statistics says that the CPI is falling, no employer will implement an annual wage adjustment, and many will go as far as to offer less for the jobs they fill after the layoffs.

While all of the government agencies and economists pitch the pending deflation, get ready for the real risk that is looming...inflation so high that it can no longer be hidden.