Bill Mitchell — The current inflation trajectory still looks to be transitory

On November 11, 2021, the Bank of International Settlements (BIS) related their BIS Bulletin No. 48 – Bottlenecks: causes and macroeconomic implications – which presents evidence that should help people who are becoming het up about the inflation numbers lately to calm down a bit. On June 8, 2021, the UK Guardian published an Op Ed I had written – Price rises should be short-lived – so let’s not resurrect inflation as a bogeyman – which I stand by. I have been criticised for dismissing the inflation threat and I regularly get E-mails announcing the Modern Monetary Theory (MMT) is ‘over’ and has been proven wrong by the rising inflation rates around the world. Those interventions actually break up my day with ‘humour’ – I am continually amazed how little people know who have such strong opinions. I always adopted the view that you work something out before forming an opinion. In this ‘social media’ era, the working out bit seems to have lapsed and people just jump in. That used to be called blind prejudice. Anyway, the BIS research is interesting and supports my on-going view that the current inflation trajectory still looks to be transitory and the forces that led to the supply bottlenecks will also likely unwind in the other direction to depress price rises.

Wake me up on this discussion about "inflation" when the pandemic is actually over with the global economy is operating normally—which is likely to be a new normal that is not foreseeable owing to the changes resulting from reactions to climate change, for example, and the condition of US-Chinese relations geo-economically going forward, e.g., increase rate of decoupling and increased rate of military expenditure owing to an arms race. In my view, there is actually a much greater threat of a global depression or war than an inflationary spiral, given the current trajectory and possible scenarios. 

"Inflation" is not even a blip on the radar, except in some overheated brains and among those talking their book. And now that MMT is becoming generally understood, the previous talk of national bankruptcy has given way to the inflation constraint. 

Bill Mitchell – billy blog
The current inflation trajectory still looks to be transitory
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia