Few are fooled, however. Citizens know in real terms how much they pay for food, fuel, household goods ... the list goes on and on.
The response to these challenges is predictable - growing uncertainty, discontent and rising tension. Indeed, achieving the right policy balances faces a number of practical impediments. Foremost among them are the political and economic pressures that converge from the tectonics of modern history.
The simultaneous pressures of both fragmentation and integration that emerge in a post-Cold War world driven by globalization and wracked by recession have not only created befuddled governments - but also hampered the ability of those governments to coordinate for the mutual benefit of each other.
Instead, Diocletian-like solutions are sought which are bound to produce economic externalities, increasing political pressure. Notably, as "First World" countries fare better than Second and Third, the finger-pointing begins, on the background of disparate impacts being felt in particular in less-developed countries.
Admittedly, the Federal Reserve's position on the current comparative weakness of inflationary threats as a result of U.S. quantitative easing is a legitimate view, which, however, represents one end of the spectrum. Another view that could turn out to have even greater mid- and long-term relevance is exemplified by comments like those made by historian H. J. Haskell who noted, when comparing the Rome of Diocletian to the United States of Franklin Roosevelt, that the impact of inflation induced by quantitative easing are far-reaching and structurally significant.
"The decay of character that attended the sudden rush of great wealth undermined the Republic," he said in his book "The New Deal in Old Rome." "Later, in a society unstable through social bitterness, extravagant public spending proved fatal. ... The spending for unproductive public works, for the bureaucracy, and for the army, led to excessive taxation, inflation, and the ruin of the essential middle class and its leaders."
Similar considerations emerge with regard to the other vectors of dealing with the post-crisis turbulence.
Although far from being comparable with the situation in the 1920s Weimar Republic, the inflationary trajectory can be seen as moving toward a tipping point.
It is worthwhile noting that inflation as a factor of global economic security has the innate capacity to upend carefully laid plans and further upset the equilibrium, in particular being a source of economic hardship that only a limited number of state actors can affect via their national policies. Witness the underlying catalysts behind the unrest in North Africa and the Middle East.
With the persistence of strained growth prospects, the specter of inflation becomes all the more worrying. In the present circumstances, the current wisdom simply will not do.
Should we be looking for the new Constantine? So far, one has not stepped forward.
Source: The Globalist
Dr. Alexander Mirtchev, President, Royal United Services Institute for Defence and Security Studies (RUSI) International; Vice-president, RUSI
Dr. Norman A. Bailey, Adjunct Professor, The Institute of World Politics; President, Institute for Global Economic Growth
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