Macroeconomics always has its fads: The latest is embracing public debt and not worrying about inflation. But fashions change very quickly.
Economic history is dotted with iron laws that didn’t endure. In the 1960s, governments were convinced of the stable relationship between inflation and unemployment — known as the “Phillips curve.”
Another example is the “great moderation” of the 1990s and 2000s, when policy makers in advanced economies believed they’d tamed the business cycle permanently.
Many economists will, as ever, claim that this time is different.
They offer various explanations of why inflation will be permanently low or negative, including: technology’s moderating effect on prices; the deflationary impact of an ageing society; and the role of inequality in constraining overall spending. Evidence since the 2008 crisis supports those who are unworried by inflation spikes.
Ferdinando Giugliano Bloomberg 9 February 2021