Contributor: David Renz

Of course we should (says the mainstream economist). Moderate levels of inflation (2 percent) may be acceptable for they help greasing the wheels of an economy. But, as soon as inflation hovers around the 5 percent level for a prolonged period of time, its true nature becomes evident. Given that we are slowly ridding ourselves from the shackles of a terrible recession, this is all the more worrying because central banks have tried to mop up the mess by injecting unprecedented amounts of liquidity into the system. If withdrawal of these funds comes too late in an eventual recovery, we may be facing an inflationary episode with levels well above what we have witnessed during the period of relative calm since the early 1980s. But even without a proper recovery, commodity prices surging ahead of an obvious cycle could trigger stagflation, i.e, rising inflation without sizeable growth to go with.... read more