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Standard inflation? The daughter of scarcity and failure of economists – Corriere.it

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Once again, economists haven’t seen the biggest breakthrough in recent years. Partly Daughter of War: But not only. The mystery remains: Why does Europe have similar data to the United States, even though it hasn’t spent much less to support its citizens during the pandemic?

Record inflation reveals this: We have entered intoIt was a rarity.

Grandma also penalties Economists fail. The vast majority of experts – public and private, working in the financial world or in government or academia – It hasn’t seen the biggest economic breakthrough in recent yearsthe transition from a period of deflation (the stagnation of everything, including prices) to a period of general shortages and sharp price hikes.

The failure of economists is fraught with consequences, and it has made matters worse by driving central banks and governments to Actions that exacerbated rather than prevented inflation.

This is not the first time that the economist’s profession has come out of a reality test and taken a beating, rather the past few years have been a succession of similar cases: They couldn’t predict 2008And the They got the wrong recipes about the eurozoneexpect The apocalypses that never happened after Brexit and Trump’s duties.

There are exceptions, but they are very few. Larry Summers (Former US Treasury Secretary) H Olivier Blanchard (Former chief economist at the International Monetary Fund) They were among the few who issued an inflation warning in early 2021. Inaudible, as most of their colleagues were of the opposite opinion: inflation would be a brief flare-up, a very temporary consequence of the epidemic.

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Even a year ago at this time, the Federal Reserve and the vast majority of economists predicted 2% inflation at the end of 2021. Instead, 2021 ended with inflation that was two to three times everyone’s average forecast. Large economic institutions, including central banks. and still, Economists are unable to explain the alignment of European inflation with US inflationboth at 8.6% despite differing conditions in their respective economies.

The fact that the vast majority of economists were “on the wrong side” of their expectations explains why the richest economy on Earth is the most powerful central bank. They added fuel to the blowing fire when all the conditions for the fire were already ready.

Convinced that America and the world were on the brink of a pandemic, in a situation very similar to the 2008 financial disaster, two American governments (the Trump and Biden administrations) and the Federal Reserve They are overly supportive of the request. Trump signed off on two public spending maneuvers worth $3 trillion in 2020. As soon as he took office at the end of January 2021, he launched his third successor, worth $1.9 trillion, deaf to Summers’ pleas they deemed irresponsible: Indeed The US economy had already rebounded strongly, the family’s income was recovering rapidly, and unemployment was absorbed at a rapid pace. US Democrats partly wanted to ignore the threat of inflation because it supported a political agenda: fear of economic catastrophe created ideal conditions for launching a massive program of family assistance, social spending and welfare. It was the Biden-Roosevelt eraThe president, who took office a year and a half ago, felt he stuck with the New Deal ninety years ago. After all, the influx of purchasing power generated by the three maneuvers amounting to 5,000 billion, together with the emigration mass, effectively enhanced The bargaining power of American workersWhich in the “magical” year 2021 They achieved record wage increases.

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If the American left can ignore the danger of inflation by making a deliberate, if short-sighted, ideological choice, The Fed’s error in forecasting and behavior is impressive: The Central Bank in November 2021 is still committed to providing liquidity by purchasing Treasury bills and bonds linked to mortgages, at a rate of 120 billion per month. More fuel for inflation.

naturally Nobody expected Vladimir Putin’s invasion of Ukraine
which was taken on February 24 this year (although there will be discussion of this “surprise” compared to a premeditated event from 2014).

But Scarcity and inflation are not a consequence of war, and not only that.

The aggression against Ukraine exacerbated shortages in certain sectors – energy, food, some minerals and metals – but supply problems existed even before.

Forecasting errors and resulting delays in reaction now haunt the authorities. Biden’s popularity is not benefiting from wage increases, meanwhile rising costs of living wipe out benefits for workers, and consumer confidence is waning. Its central bank is forced to keep track of events, and work on a tighter and faster monetary tightening, because its credibility has waned in the markets.

The puzzles remain. Europe It has spent far less to help its citizens during the pandemic, and hasn’t created the excess demand that Trump and Biden have generated, yet Finds himself with an identical cost of living.

The Japan It has as generous monetary policy as US policy so far It does not yet know any significant indicators of inflation.

also China Part of the catalog of puzzles, because it led to frantic increases in production costs (raw materials), and prolonged production stops (Close
) , Until now Not subject to inflationary pressures comparable to Western.

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Jul 1, 2022 (change on Jul 1, 2022 | 15:59)

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