“It’s not like the post-war period,” he said. “In fact, after the Second World War, many of the advanced countries started at very high levels of debt – the United States, the UK, many European countries – but they brought it down dramatically over 30 years. How did they do it? Rapid growth and inflation. And both of those are not possible anymore.”
“Rapid growth is no longer possible; these are now aging societies; productivity growth is much lower than before,” he said.
“And inflation is not going to be tolerated by older societies,” he said. “They may be tolerated when societies are young and everyone’s incomes are going up, but it’s not going to be tolerated now. So that option isn’t there.” Like medication that is not tolerated and makes the sick patient even sicker.
What consumer price inflation does in today’s developed economies is destroy the purchasing power of the currency, and thereby the purchasing power of already struggling labor paid in that currency, and thereby dent consumption and create more social frustrations and inequities, that would then be addressed with even more borrowing and printing and inflation?