The unique political economic structure of each nation will extrapolate to different effects from the du jour trend of central banking inflationism (mainstream terminology: currency devaluation or depreciation). The above chart shows of the interplay between three forces: imports as % of GDP, year on year change of price inflation and the weight of the indicated developed economy relative to the world.
Notes the politically influential US think tank the Council of Foreign Relations CFR,
Currency depreciation is likely to have a much more adverse effect on inflation in the UK than in the United States, the eurozone, or Japan, owing to much higher imports relative to GDP. UK consumer price inflation is already running at a relatively high 2.8%, and the Bank of England’s own analysis suggests that a 20% sterling depreciation risks pushing the price level up 6 percentage points higher than it would otherwise be.
Of course, the degree (intensity and time period of implementation) of such inflationist policies will matter too. And so with other incumbent and prospective policies such as capital/currency controls, wage and price controls, taxes, bureaucratic regulations, and others.
Nonetheless, the long term impact from the latest creed of “something for nothing” policies from global central banks will be the opposite of the expectations or the goals of policymakers.
This means that gambits of policymakers to preserve current political economic systems will eventually translate to our suffering, whether via boom bust cycles (financial crises) or stagflation.
No comments:
Post a Comment