Looming Inflation Casts a Shadow on Tomorrow
In a thought-provoking article penned by economist Brigitte Granville, the author delves into the insights that can be gleaned from the Great Inflation of the 1960s to 1980s, and how these lessons can help us navigate current and future economic issues.
The Great Inflation was a period of high and persistent inflation that plagued many economies around the world. However, since the 1980s, Germany has managed to keep inflation under control, with no instances of hyperinflation since the early 1920s. Japan, on the other hand, has struggled to reach its 2% inflation target, with three key reasons identified for its inability to do so.
The article does not focus on the specific economic problems that exist today, but rather on the importance of understanding the Great Inflation as a means of better comprehending current and future challenges. Political leaders are increasingly concerned with the threat of debt-induced deflation, which could potentially lead to a depression. Dismissing inflation as a "problem of the past" could undermine central banks' efforts to maintain economic stability.
In the current global economic climate, inflation is not the primary concern, but understanding the factors that contributed to the Great Inflation can provide valuable insights. For instance, the specter of inflation is no longer what it used to be, with many economies successfully taming inflation since the 1980s. However, the lessons learned from the Great Inflation offer important lessons for resolving current and future economic issues.
In the case of Japan, the three reasons for its inability to reach its inflation target include structural issues, such as an aging population and a lack of price competition, as well as monetary policy challenges. Germany, meanwhile, has faced issues with inflation in the form of bizarre taxes in some cities.
In conclusion, understanding the Great Inflation provides a valuable lens through which to view current and future economic challenges. By learning from the past, we can better prepare for the future and navigate the complexities of the global economy.
