The chairman of Capital Economics, and a staunch Keynesian, believes the world may be about to see a resurgence of inflation which has been relatively tame for decades. Mr. Bootle argues that pent up demand for goods and services, coupled with unusually large household reserves of cash, thanks to Covid restrictions on the normal habits of human society and government stimulus along with hyper aggressive monetary policy (QE), could be setting the stage for an inflationary spike.
Unfortunately it is behind a paywall. But for those with a subscription I recommend the article. Some of the comments are also quite good.
2 comments:
As a theoretical matter, the logic behind this prediction makes fine sense. However, we have been hearing predictions of imminent inflation spikes for nearly two decades now—through both boom and bust phases of the business cycle—and through all of it core inflation remains relentlessly contained between about -0.1% and 2.1%. When we actually see core inflation climb above 3%, then—and not before—I will believe that it is getting away from Fed control.
Of interest is what role a $15/hr minimum wage would have on pushing demand for goods & services. Will it a) put more money in pockets to go buy all the stuff the Chinese have been busily manufacturing while the rest of us have been locked down, or b) increase unimployment & depress consumer spending?
BTW - I can't help but wonder how much of Biden's 1.9 trillion COVID relief would wind up in Chinese banks.
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