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“Inflation is a very old phenomenon that remains poorly understood”


En the year 301, Emperor Diocletian issued the “Edict of the Maximum”. More than 900 consumer goods – including a male lion – were now subject to price caps. Exhausted and impoverished by constant wars, the Roman Empire was then struggling to pay its soldiers and had gradually reduced the amount of silver in its coins. This devaluation, which did not say its name, had gradually caused a sharp surge in inflation, which the leaders of the time were trying to curb. Should it be specified? Their attempt was in vain.

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By the way, the masters of Rome refused any responsibility in the rise in prices, which had nothing to do with the currency, according to them. They pointed, on the contrary, “those who dare to go against this edict” And “those who initiate a shortage [en accumulant des stocks] ». Clearly, the culprits were the producers and traders who lined their pockets by increasing their prices. For good measure, the punishment incurred was the death penalty.

Almost two millennia later, inflation is back. The culprits are, once again, the others. “We will not let the big manufacturers make undue margins (…) on the backs of consumers”, thundered, in April, the Minister of Economy and Finance, Bruno Le Maire. Price controls were considered, with the idea of ​​an “anti-inflation basket” finally abandoned. Only the threat of the death penalty has disappeared… Need we specify? None of these perorations will subdue inflation.

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Economic Advisor at HSBC, Stephen King has just published a very informative – albeit technical – book attempting to draw lessons from two thousand years of inflationary history (We Need to Talk About Inflation, Yale University Press, 224 p., 26.73 euros, untranslated). In addition to the distant difficulties of the Emperor Diocletian, he recounts the repeated mistakes of the leaders faced with the sudden surges in prices, from the hyperinflation of the French Revolution – when the experiment of the assignats ended badly – to that of the Germany of 1923, through the failure of the price controls imposed by US President Richard Nixon.

The key to expectations

The book’s most fascinating lesson is how much inflation – “who attacks by surprise”, according to the author – remains a poorly understood phenomenon. On one side are the monetarists, led by Milton Friedman. For them, inflation is the direct consequence of the quantity of money. False, the central banks have been answering for fifteen years: just look at the huge debt purchases carried out since 2008, after the great financial crisis, which did not cause any inflation until 2020.

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