DRAFT: Þe First Inflation Problem of þe 21st Century

As of 2023-01-20: My guesses as to the form and shape of the inflation process currently going on in the United States, and my guesses as to the proper stance of monetary policy right now. A draft...

Perhaps there was progress in macroeconomics back before 1940. Certainly by 1940 it was the consensus of economists that the claim of Josef Schumpeter and others that depressions were a necessary "functional" part of capitalism—an inevitable concomitant of adjustment to change in the creative-destruction process of modern economic growth—was dead as a doornail. It was 131 years since John Stuart Mill had first argued that “general gluts” excess supplies of pretty much every produced commodity and of labor, are the flip side of an excess demand for money.

It had taken 131 years to achieve this consensus. It was achieved only after the rude interruption of the discourse of economic theory by the Great Depression. There were unsettled questions about which aspects of money were key to the destructive excess demand—liquidity? safety? collateralizable nominal value? Its use as a savings vehicle? And there were unsettled questions about whether central banks performing open-market and lender-of-last-resort operations could do the stabilization policy job, or whether a somewhat comprehensive socialization of investment would be required.

Since then, however, whether there has been significant progress is doubtful. Alan Blinder's new A Monetary and Fiscal History of the United States, 1961-2021 describes a game of constant musical chairs without the number of chairs ever decreasing, or perhaps a game of whack-a-mole:

of wheels within wheels, spinning endlessly in time and space … [with] certain themes … waxing and waning … monetary versus fiscal … the intellectual realm … the world of practical policy making … the repeated ascendance and descendence of Keynesianism…