We Need to Talk About Inflation: 14 Urgent Lessons from the Last 2,000 Years

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He goes on to say that there are four issues that could have conspired to generate higher inflation this time: institutional changes (such as the Fed introducing more flexibility into its inflation targeting regime), signs of monetary excess (accommodating the rise in inflation - unlike before the global financial crisis where central banks offset deflation from abroad by running policy too loose), the trivialisation of inflation, and weaker economic supply conditions. A ‘rules-based’ policy framework is important: the public need to know how policymakers are likely to respond

Third, are inflationary risks trivialised or excused? It took 2.5 years for the annual rate of UK inflation to rise from 0.3 per cent to 10 per cent: yet, throughout that period, the Bank of England persistently forecast that inflation would return to the 2 per cent target within two years. A myth-busting explanation of inflation, the desperate gullibility of central bankers and finance ministers—and our abject failure to learn from historyIn April, Procter & Gamble announced it would start charging more for consumer staples ranging from diapers to toilet paper, citing “rising costs for raw materials, such as resin and pulp, and higher expenses to transport goods”. I recently completed ‘The Lords of Easy Money’ - The differences in chronology and structure were telling. Some interesting conclusions though. In King’s view the argument used by central banks against tightening, that it was all just ‘transitory’, was fuelled by central banks having presided over a low inflation environment for nearly two decades, falling victim of their own anti-inflation propaganda. As a result, serious mistakes were made when circumstances suddenly changed. We saw the impact of the supply and demand imbalances when Covid restrictions ended and then the extra pressures on energy and food prices with the war in Ukraine. But in King’s view the reappearance of inflation in the last couple of years was not just “a series of unfortunate events” but should have been seen by central banks and acted upon more swiftly. it makes economic planning incredibly difficult, causing people to invest time in thinking about inflation to the detriment of more productive activities (Germany: buying two beers at the same time; Turkey: hoarding washing machines), You may also opt to downgrade to Standard Digital, a robust journalistic offering that fulfils many user’s needs. Compare Standard and Premium Digital here.

The government green-lighted Wall Street’s consolidation into five giant banks, of which JP Morgan is the largest. King concluded by looking to the future. He saw two major risks - that central banks may only be able to achieve their inflation targets with a lot more heavy lifting from monetary policy (thereby risking a hard landing), or that they are so fearful of the ramifications of far tighter monetary policy (particularly if fiscal policy has run out of space) that higher inflation ends up being accommodated. The book is genuinely interesting throughout, yet also wide‐​ranging, so choosing sections to review is difficult. But three areas where King has alot of particularly interesting things to say are on how policymakers might think about inflation’s persistence, why inflation matters, and the difficulties of alleviating modest inflation.PDF / EPUB File Name: We_Need_to_Talk_About_Inflation_-_Stephen_D_King.pdf, We_Need_to_Talk_About_Inflation_-_Stephen_D_King.epub

Building on the history of inflation and its relationship with money, the author looks at the temptation of printing money, how inflation has undemocratic effects and why it is so difficult to reduce. It could raise prices and rake in more money because P&G faces almost no competition. The lion’s share of the market for diapers, to take one example, is controlled by just two companies – P&G and Kimberly-Clark – which roughly coordinate their prices and production. It was hardly a coincidence that Kimberly-Clark announced price increases similar to P&Gs at the same time P&G announced its own price increases. Not just a useful and well-written account of inflation for the layman, but a contribution to a debate that is still very much live. A brilliantly clear and concise new history.”—Juliet Samuel, Times (UK)Distributional costs of inflation / Why is inflation such abad thing? Many people conflate inflation with the cost of living and are hostile to it because of the effect arising price level has on the real value of some fixed forms of income and wealth. But King uses aremarkable statistic to show that this shouldn’t be our main inflationary fear. Counterintuitively, King argues that defeating hyperinflations may be easier than the more modest inflation that we see today. The damage of extreme hyperinflations is so obvious and typically is the result of acomplete breakdown in monetary discipline. As aresult, policymakers and the public are eventually more accepting of the strong medicine needed to bring hyperinflation to an end. Acredible push to implement the structural changes needed to eradicate it are unlikely to run up against many hyperinflation “enthusiasts.” How might monetary policymakers better assess whether inflationary pressures are likely to be more persistent in the future? King posits four “tests” that they should consider. If the answers to the questions are “yes,” then our monetary overlords should be alive to the threat of ongoing elevated inflation. The implicit critique is that, by failing to consider these questions this time, central bankers were asleep at the wheel, allowing aggregate demand to outstrip supply.