Infectious Inflation

Barry Eichengreen, via Brad DeLong:

There are now fifty countries in the world with inflation rates over 10%. It’s like the early 1930s, but just reverse the sign: back then everybody with their currency linked to the dollar imported deflation; now everybody is importing inflation.

The solution then as now is the same: delink your currency from the dollar.

It’s not just the dollar, of course: inflation is picking up in the eurozone as well. And it’s only partly US inflation which is being imported: much of the rest is US depreciation. But I do think that it’s a bit much to hope that even if both the US and the eurozone are seeing inflation pick up, other countries with much smaller currencies can somehow keep inflation under control.

This entry was posted in economics. Bookmark the permalink.