The inflation hawks have a point: inflation is genuinely destabilizing. When working people’s purchasing power declines, they rightly worry that heating their homes, putting food on the table, or commuting to work will cause them to fall into debt, and, eventually, poverty.
But where the inflation hawks go wrong is in blaming “money printing” for inflation. It’s true that when demand exceeds supply, prices go up, but the nutrition, shelter and transport are not luxury goods whose prices are spiking because we gave ordinary people more money than they deserved.
It takes a certain kind of wilful blindness to focus exclusively on the role demand plays in inflation, without paying attention to supply. After all, the current inflationary run coincided with some extremely significant supply shocks: the removal of Russian oil and gas from global markets; the pandemic’s shattered supply chains, and blatant, illegal, coordinated price-gouging on the part of cartels and monopolies.
Focusing on the too much money side of the inflation equation ignores the too little capacity side. Those brittle supply chains that were shattered by the pandemic? They were a policy choice, not an historical inevitability: the world’s rich countries decided to dismantle their manufacturing and send it overseas in search of cheap labor and weak regulation.
The poor world was also screwed by policy choices: Institutions like the IMF insisted that former colonies orient their production around export goods rather than self sufficiency.
The monopolies that are using the polycrisis as a pretense to hike prices? They weren’t accidents — they were deliberately created under an ideology that insisted that monopolies are efficient and competition is for losers.
Our historical touchstones for hyperinflation are likewise crises of capacity. Weimar Germany, the poster-child for inflation, is a perfect example. The decision to impose reparations on Germany beyond its ability to pay doomed Germans to a spiral of decreasing capacity. Prices went up in Germany because there wasn’t enough stuff to go around — not because they printed too much money. Indeed, Weimar’s money-printing happened after the prices went up, because there…