September 28, 2021

Back to school triggers memories of the run up to the financial crisis

Some of these central bankers, and quite a few outside commentators, have focused on the fact that the recent pick-up in prices is not generalised throughout the whole economy and, in particular, it hasn’t led to an economy-wide upsurge in wages. This attitude strikes me as too complacent. When an inflationary upsurge emerges, it does not pre-announce its arrival. Moreover, inflation is a process. It is normal for it not to be present to the same degree in all markets and all products at once.

As it is, inflation is very evident in a number of important markets. Perhaps the most significant of these is housing, where prices have been zooming up in most countries. And in parts of the labour market in the US and the UK, there is decided upward pressure on wages.

Even if such asset price inflation as is evident in American equities and property almost everywhere doesn’t spill…

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