unSILOed with Greg LaBlanc 331. Inflation Strikes Back feat. Stephen D. King
Even though central banks have become independent over the years, is it fair to say they still face political challenges? Could inflation be viewed as a political problem or a technical one?
Stephen D. King is a senior economic adviser at HSBC and has been writing about global economics for years. His most recent book, We Need to Talk About Inflation: 14 Urgent Lessons from the Last 2,000 Years, examines the root causes of inflation through a historical lens.
Stephen and Greg discuss whether inflation is inherently tied to politics, why deflation is not necessarily a scary thing, and the greatest challenge facing central bankers today.
*unSILOed Podcast is produced by University FM.*
Episode Quotes:
Inflation tends to create a world for winners and losers
07:00: So, inflation tends to create a world of both winners and losers. And it's a profoundly undemocratic process in that sense because that process of creating winners and losers is pretty arbitrary. But of course, the problem there is that if you happen to be a loser initially, you're going to want to push for your own wage increase or your price increase later on because your next-door neighbor has already had one of those, and you're waiting for your turn. So when you try to stop inflation, you are effectively trying to stop it when some people have already perhaps benefited from it. And other people feel quite rightly quite justifiably that they haven't; in fact, they're actually worse off in some sense. So stopping it once it's started becomes a lot more difficult.
Have we forgotten the adverse consequences of inflation?
05:47: With the advent of central banks becoming politically independent, I think there was a habit of thinking that inflation was a technical problem. It was a technical challenge for central banks, but not really a political challenge in any significant way. But actually, I think inflation is a huge political challenge.
Does the central bank overestimate the degree of control they have over velocity?
33:22: It's not just how much money you print; it's what the public thinks of what it is you're doing. Do they trust you? Do they think you're on the right track or the wrong track? In other words, the velocity partly depends on how the public rates you as a credible monetary institution. So, if you're doing stuff that seems to be overly experimental or peculiar, you may suddenly discover that what you thought was a relationship between money and the economy breaks down one way or the other.
Will we be entering into a new era where the central banks reassert their independence and reestablish their credibility?
57:27: I think that where inflation is relatively high and economic growth is relatively low, it's going to be a very interesting situation to monitor over the next three or four years to see whether central banks, first of all, are able to reassert their sort of independence. And secondly, whether, politically, they can get away with it and have the legitimacy to do so.
Show Links:
Recommended Resources:
Guest Profile:
- Professional Profile on Bruegel
- Speaker’s Profile on London Speaker Bureau Asia
- Stephen D. King on LinkedIn
- Stephen D. King on X
His Work:
- We Need to Talk About Inflation: 14 Urgent Lessons from the Last 2,000 Years
- Losing Control: The Emerging Threats to Western Prosperity
- When the Money Runs Out: The End of Western Affluence
- Grave New World: The End of Globalization, the Return of History
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