Political economist Mark Blyth explains why inflation in the U.S., Canada, and the E.U. is highly unlikely. There is a great deal of room for more government spending and higher wages before much inflation is possible. Mark joins Paul Jay on theAnalysis.news

Transcript

Paul Jay

Hi, I'm Paul Jay. Welcome to theAnalysis.news. Please don't forget there's a donate button at the top of the website. There's a subscribe button on YouTube and share buttons all over the place, and the more you share, the more we grow. And we'll be back in a second with Mark Blyth.

 

Is inflation a thing of the past, or as former Treasury secretary for Bill Clinton, an economic adviser to Barack Obama, Larry Summers wrote in an op-ed for The Washington Post in February that Biden's "stimulus might cause, quote, inflationary pressures of a kind we've not seen in a generation with consequences for the value of the dollar and financial stability."

 

In March, he repeated his warning that, quote, "The risks resemble those seen in the 1970s. The idea that inflation can suddenly spike to worrying highs is just plain wrong" he told Bloomberg TV. He added, "lifting taxes on wealthy Americans and corporations could double the spending risks".

 

Olivier Blanchard, former chief economist at the IMF, agreed with Summers on Twitter writing that the package that's the Biden package could "overheat the economy so badly as to be counterproductive." At a recent Munk debate, the issue was described as following "20 trillion dollars of government stimulus in countries around the world. Interest rates so low there's no incentive to save. And more than half a billion vaccinated consumers ready to pull out their wallets and kick off the roaring 20s of the 21st century. Some experts believe that a surge in inflation, such as we haven't seen since the 1970s, is in the cards. Inflation bulls argue that the post-pandemic recovery is just one of the many trends converging to create rising prices for years to come."

Other economists are saying the specter of a long-term rise in inflation is just that, a fiction in our imaginations. Now joining us for his take on the issue is Mark Blyth.

 

Mark is a political economist at Brown University. He researches the causes of stability and change in the economy, and as he says, why people continue to believe stupid economic ideas despite buckets of evidence to the contrary, and every time I introduce him, I going to keep saying that because I like it. So, Mark, thanks for joining us.

Mark Blythe

It's always a pleasure.

Paul Jay

And is the idea that inflation is about to come roaring back one of the stupid ideas that you're talking about?

Mark Blythe

I hope that it is, but I'm going to go with Larry on this one. He says it's about one third chance that it's going to do this. I'd probably give it about one-tenth, but it's not impossible. So, let's unpack why we're going to see this. Right.

 

Can you generate inflation? Yeah. I mean, dead easy. Imagine your turkey. Why not be a kind of Turkish pseudo dictator? Why not fire the head of your central bank in an economy that's basically dependent on other people valuing your assets and giving you money and capital flows? And then why don't you fire a central bank head and put your brother-in-law? I think it was a brother-in-law, and then basically insists that basically low interest rates cure inflation and then watc...