Foreword

Mihir Worah

Inflation ranks among the most insidious and destructive of economic forces.

At the extreme, hyperinflation – as seen in Germany during the Weimar Republic in the 1920s, when prices doubled every few days, or Hungary in 1946, when prices doubled every 15 hours – can destroy the value of paper money and social cohesion. Even moderate inflation can pick the pockets of savers, erode the competitiveness of industries and nations and wreak havoc with investment portfolios designed to preserve purchasing power.

Since Paul Volcker broke the back of the Great Inflation in the early 1980s, the US has enjoyed three decades of uninterrupted, low inflation. In fact, in the aftermath of the financial crisis of 2008, deflation, not inflation, has seemed the larger risk.

Nonetheless, the outlook for inflation has grown more uncertain, the investment challenges and opportunities more immense. A mix of unconventional monetary policy and massive fiscal stimulus has saddled the US with an unsustainable debt load, leaving few solutions: faster economic growth, higher taxes, reduced spending or inflation. Among these, inflation is the easiest, at least in political terms, and the most likely