THE TROLL UNDER THE BRIDGE In the age of the internet a troll is someone who posts inflammatory or insulting comments on a blog or website. But the legendary description of a troll is a grotesque and dangerous supernatural creature that hides under a bridge waiting to pounce on hapless travelers. Being a fan of horror movies, I like the second definition better. But this is a financial column after all, and the troll I’m talking about is currently hiding under the bridge, but make no mistake about it, it’s getting ready to pounce. This particular troll brought down the Weimar republic in the thirties setting the road for the rise of Hitler and World War II, it kept Nixon and Ford up at night, gave then-Fed chairman Alan Greenspan ulcers, and brought about the deep recession of 1979-80, and right now it’s under the bridge, out of sight for the moment, just biding its time. Its name is Inflation. Rising commodity prices are all around, copper’s up by 30%, stainless steel by 20%, cotton, gasoline, silver, all going up. Other prices going up include food items like beef and grain, coal pushed up by growing demands not only in the US but China, India, Europe and Russia as well. Higher rents are coming, temporarily depressed (but not forever) by the housing slump. Utility bills will also increase, nudging up the cost of housing which accounts for 42% of the Consumer Price Index (CPI) All these things are a red flag, but there is no imminent threat for the moment. The CPI will probably increase by a modest 2% for 2011, topping 2010’s 1.5% increase. What’s keeping the troll under the bridge is slow growth and high unemployment. By 2012 that’s likely to change, when growth hits 4%, job gains rise above the 200,000 marks, then you’ll hear the Fed warn about inflation and raise interest rates. But everyone should be aware of another kind of troll, and this one isn’t staying under the bridge: P.I. — Personal inflation! A family of five where working parents must drive thirty or forty miles to work, buy food for eating machines we call teen-agers, and own a house on Long Island with astronomical property taxes, will find the CPI useless in describing their own particular brand of inflation. So what can we do? Well, the most important thing is to slow down government spending. We’ve mostly passed the recession and now it’s time to quit spending like drunken sailors on leave. Balancing the budget should be job number one. Congrats to Governor Cuomo for making this a priority. It’s time for our politicians to stop being knuckleheads, quit taking off their shirts and pants on the internet and pay attention to the job they were elected to do. Write them everybody, tell them to pay attention, stop wasting money and balance the budget, and as my old friend Willmott used to say: And why not?