Our policymaking elite take it for granted that inflation is the outcome of an isolated economic mechanism and can be managed by a technocratic, independent central bank which understands the mechanism. Milton Friedman summed up this mechanistic view by saying “inflation is always and everywhere a monetary phenomenon”. Fine for economists, but social and political contexts shape the dynamics of inflation in disparate and confounding ways. Friedman’s statement is about as helpful as saying: “Flooding is always and everywhere a watery phenomenon.”
The lack of humility in the technocratic central bank view of inflation is about to be exposed by a reversal of the dynamics of the past 40 years.