Is inflation coming back in the major capitalist economies? As the US economy (in particular) and other major economies begin to rebound from the COVID slump of 2020, the talk among mainstream economists is whether inflation in the prices for goods and services in those economies is going to accelerate to the point where central banks have to tighten monetary policy (ie stop injecting credit into the banking system and raise interest rates). And if that were to happen, would it cause a collapse in the stock and bond markets and bankruptcies for many weaker companies as the cost of servicing corporate debt rises?

The current mainstream theory for explaining and measuring inflation is ‘inflation expectations’. Here is how one mainstream economic paper put it in relation to the US: “Over the longer-term, a key determinant of lasting price pressures is inflation expectations. When businesses, for example, expect long-run prices…