Education Information

Initially, in the summer and autumn of 2021, there was a widespread expectation amongst mainstream economists that the inflationary “shock” would be only temporary since it resulted from the temporary disruption of the lockdowns. But it gradually became clear that inflation was going to rise much higher than many economists expected and would remain high for a long period of time. The Bank of International Settlements, an important oversight body for the global financial system, even argued that we have entered a new “high inflation regime”, where price rises will remain much higher than in the past. 9 No one would disagree about the effect on inflation by initial shock of the pandemic, followed by the shock of the war in Ukraine. But what we have to deal with today is increasingly the question why inflation is staying high. As we have argued, the fundamental reason is the weakness of supply. But the mainstream arguments in the media and elsewhere are very different. Two mainstream arguments stand out. The first claims that there is too much money in the economy generally. The second – related to the first – claims that workers (and perhaps pensioners and those on benefits) receive too much money as their income. Both are wrong and would take Britain down a disastrous path.

See the Bank for International Settlements, Annual Report 2022 , June 2022 available at: https:// 9 www.bis.org/publ/arpdf/ar2022e.pdf

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