Expect rather stable consumer price inflation – but not because of succesful central bank management

an amazing article about the evolution of inflation in EEUU, among other things, and its influence in european economy, including a coment about Woodford’s theories and their influence in the sub-prime bubble.

Real-World Economics Review Blog

In 1910 the index of the USA consumer price level (1982-1984 = 10,000) was equal to 921, not too much above the 1774 level of 782. This seems to indicate very low and stable consumer price inflation in this gold-standard period – until we notice that the 1778 level was equal to 1338, almost double the 1774 level (the American revolutionary war lasted, of course, from 1775 till 1783). Sustained high inflation was not uncommon during the gold standard period, especially during times of war (graph 1, which shows Year on Year changes of the consumer price level as well as a five-year moving average), though there were often also large differences between subsequent years. Collateral information: notice that in the twentieth century, high inflation continued for one or two years after mayor wars. After these bouts of inflation, however, there was some kind of reverse to the mean and…

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