The Importance of Inflation

In 2022, a perfect storm of economic problems including stagflation threatens the international financial system. Stagflation is the combination of inflation and stagnation, which historically leads to economic growth. However, the current situation is different as there is no growth but inflation remains high. This scenario mirrors what happened in the 1970s and 80s, leading to the infamous Volcker shock. The US central bank aggressively raised interest rates, resulting in many countries sinking into debt. This pattern is repeating today, causing increased costs of food and energy, worsening poverty. Development economists at the United Nations Conference on Trade and Development are concerned about the situation.