I know that a while ago I made two inflation bets, one with Bryan Caplan and a much more serious one with David Henderson. Here are the terms with Caplan:
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 [Caplan pays Murphy] 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 [Murphy pays Caplan] $100 at that time.
Then David R. Henderson wanted in on the action, and he exacted far harsher terms:
At any point between now and January 2013, if there is a year/year increase in seasonally adjusted CPI that is at least 10%, then [Henderson pays Murphy] at that time $500.
If we get to January 2013, and there has not been any 12-month stretch in which the above happened, then [Murphy pays Henderson] $500 at that time.
BTW, please spare me a lecture on the fact that I would be winning diluted dollars. I KNOW. Feel free to say I can’t tell when it’s coming, but please believe me when I say I know what price inflation is.
I made the above bets in December 2009. Things are obviously not progressing on the timetable I had thought (as has been well documented on these pages), but I’m still confident in my bet with Bryan and would make it again. The one with David is obviously looming much more menacingly. If it weren’t for the crisis in Europe (which is pushing people to flock into dollars), I would still be fine with it, but it may turn into a nailbiter.
Speaking of the euro, Bryan linked to his bet with Jeremy Rabkin who predicted (in 2007) that the currency would collapse by the end of 2010. What’s hilarious is this confident comment left by Barkley Rosser (written in January 2007):
[Bryan, the] odds are way in your favor. This has been one of the favorite fantasies of a subset of libertarians and conservative economists in the US, that first the euro would never get off the ground (they lost that one big time) and now that it will surely fail. Do these people go to Europe at all? The only country that has mumbled at all about getting out was Italy briefly under Berlusconi, who is now out and the talk has loudly stopped. If you lose, it will be Italy, but nobody else.
The euro is here to stay. Heck, it is the world’s strongest currency right now, with the possible exception of the UK pound, although it has been dipping recently. Even if Italy were to depart, it is slowly joining the US dollar as a main international reserve currency. The people predicting its demise are living in fantasy land, big time.