Guest post. Translated from the French by Tim Gupwell
Whenever monetary creation, or the famous concept of printing money, is alluded to, the idea of hyperinflation is never far away. Subsequently, reference is made to history to predict a return to these episodes that left such an indelible mark in people’s memories. The conclusion immediately drawn is that the same cause will have the same effect.
However, the crisis we are living through might well lead us to a more nuanced picture. The first thing that needs to be considered is that we are seeing an inflation of financial assets, not of the prices of consumer products. The next remark that needs to be made is that this latter type of inflation has not been seen in the United States, in Japan or in Great Britain, all countries whose central banks have not held back when it comes to monetary creation.
Of course, it can always be countered that it is only a matter of time, and that the next flurry of snow will trigger the avalanche. But is this really a satisfactory argument? Looking at it another way, it seems that the liquidities lavishly distributed by the central banks do not actually trickle down into the real economy and are notoriously used to other ends, which do not lead to an increase in consumer prices. The heavy downward pressure on wages constitutes an additional obstacle to the appearance of the dreaded phenomenon.