The main dilemma of central bankers and governments, investors and households is that should we worry about inflation in the long run or today’s high consumer price inflation data are due to the recovery of the recession caused by the pandemic?
Martin Wolf recalls Milton Friedman’s old saying that “inflation is always and everywhere a monetary phenomenon” adding to it that “inflation is always and everywhere a political phenomenon” /FT, Opinion, 5/19/2021/.
Nevertheless, both are right. High inflation is always and everywhere a monetary phenomenon based on political decisions that aim for financing wars. It was the case in the 1970s when the U.S. wanted to halt the rise of Germany and Japan. This is the case now, when the Anglo-Saxon Alliance decided to halt the rise of China.
Globally, especially in the western economies, we have to pay heavy prices for this new cold war.
Governor Matolcsy, MNB, the Central Bank of Hungary