Six years ago, Robert Murphy and I made
the following bet:
At any point between now and January 2016, if there is a year/year
increase in seasonally adjusted CPI that is at least 10%, then you pay me at that time $100.
If we get to January 2016, and there has not been any 12-month
stretch in which the above happened, then I pay you $100 at that time.
The December data is not yet in, but unless an unhailed hyperinflation stuck last month, I've comfortably won the bet. Indeed,
cumulative inflation over the
entire period from January 2010 to November 2015 was only 9.5%.
Why was I so eager to bet Bob on this? The
TIPS market, which consistently forecast very low inflation for many years. And continues to do so. The upshot is that I'm happy to make the same bet for the next six years, too. Takers?
P.S.
Respect Bob in the comments.
You made the bet in nominal terms?
Not only did Bob put his money where his mouth was, but he did it with the odds stacked against him.
It will be interesting to see if Murphy has changed his model as a result. That is to say, if he had the same data today, would he make the same bet?
Bryan,
With only one cup of coffee in me so far during this entire year, I have to think pretty hard to understanding the terms of your bet. Who are "you" and "me" in the block quote.
Reading between the lines, I surmise that Bob was expecting lots of inflation, more than you. Okay, that makes sense.
Mr Hammer, my thoughts as well.
Mr Caplan, was betting on high inflation and
still won the wager anyways.
I too am curious if Mr. Murphy used praxeology to make his inflation forecast, and if this most recent failure has caused him to reconsider his model of the macroeconomy.
I appreciate your clarity on why you were willing yo bet. Do you know why Murphy was willing to bet (or do you prefer not to try to speak for him)?