A spectre is haunting investors: the return of inflation

Unexpectedly high inflation would raise interest rates, destabilise exchange rates, ignite unrest in labour markets, push the highly indebted towards default and destabilise asset markets.

The 1970s were an era of stagflation — high inflation and low growth. They were also, as a result, an era of terrible performance for asset prices.

Stocks did terribly, too. The cyclically-adjusted price/earnings ratio (CAPE), developed by Nobel laureate Robert Shiller, collapsed from 24 in 1966, to 8 in 1974 and 7 in 1982.

Another salient characteristic of the past four decades has been expanding debt

In 2005, former Federal Reserve chair, Ben Bernanke, called this phenomenon “the savings glut”. More recently, former US treasury secretary, Lawrence Summers has termed it “secular stagnation”.

The ideas of “Modern Monetary Theory” has won much intellectual favour on the left.

... waves of default far more pervasive than in the early 1980s, when the big story was the debt crisis in developing countries. This time, the debt crises could be almost everywhere, because there is so much more debt.

Inflation has not come back. It may never do so.

Martin Wolf 26 March 2021

https://www.ft.com/content/6cfb36ca-d3ce-4dd3-b70d-eecc332ba1df

The Communist Manifesto: "A spectre is haunting Europe—the spectre of communism.

https://en.wikipedia.org/wiki/The_Communist_Manifesto

This administration wants to avoid the mistakes of the Obama era. But it could make opposite ones. 

Martin Wolf 23 March 2021

https://englundmacro.blogspot.com/2021/03/lawrence-summer-these-are-least.html