This newspaper has already commented a few weeks ago on the signs of inflation, and of potential “stagflation”, which were felt. Now, due to the strong recovery underway in the United States and the robust performance of the European economy, there is no longer any fear of “stagflation”, which seemed to be indicated above all by the surge in the prices of some basic products, by the sharp increases in freight rates, and the difficulty in finding, in the desired quantities, some essential components for industrial production (such as the “microchips” for the automotive sector) whose manufacturing has been gradually delocalized to the Far East. Fixed income categories are particularly concerned,
Then the inflation started from the United States: in the USA what could be bought with one hundred dollars in 1970 would have required 280 in 1985. There have been price increases in the last fifteen years, but moderate; also in the US, the basket that required 100 dollars in 2005, asked for 135 in 2020. It is useful to compare the phenomenon in the two periods starting from the case of the United States, which I know well since I lived in the US capital (although often coming to Italy) from 1967 to 1983, thus experiencing the great inflation of that period.
At that time, inflation was triggered and fueled by two political determinants. First, American governments (whether the White House had a Democratic or a Republican tenant) were reluctant to turn to Congress for an increase in taxes and duties to finance military spending (especially for the Vietnam War); they therefore resorted to ever greater deficits which led to the end of the exchange system in August 1970, again on the dollar convertible at a fixed rate into gold, and, therefore, to a phase of monetary chaos. To this factor was added the double oil crisis of the first half of the seventies, which led at the same time to a fall in production and income and to increases in prices.
Today, the main determinant is the recovery from the recession caused by the pandemic, a recovery stimulated by expansionary and fiscal and monetary policies. The precedent is euphoria, accompanied by expansionist policies, after the Spanish epidemic of 1918-19. At that time we operated in a context of a highly fragmented world economy, with a modest knowledge of macro-economics. We are now in a highly integrated international economy and we know how to manage monetary and budgetary policy.
As we saw in this newspaper on July 13, the main monetary authorities – those of the United States and the European Union – are evaluating whether and how to refine their maneuvers and especially if and how to return to “conventional” policies, now that it is coming out of the recession and inflation tingles are being felt. Also in the field of fiscal policy, a reshaping is underway after the large deficit spending to prevent the collapse of consumption and production, as well as social tensions, due to the collapse of activities due to the pandemic. In the United States, after having launched extensive support programs, the Biden administration has great difficulty in getting the multi-year program to modernize the US infrastructure park approved by Congress. In Europe,
Therefore, there are no convergences of situations and policies with respect to the seventies and eighties of the last century, but rather divergences. If no glaring mistakes are made, price increases will remain contained.

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