Reversals of fortune

Veritable oceans of ink have been spent speculating on how we got to a reelection of Trump. One of the favored theories is that it was the inflation that consumers suffered through that brought Biden down, the proverbial "price of eggs." Inflation was undoubtedly a major cause, but it's not because it was so bad. Our brief period of pretty bad inflation fairly pales in comparison to real instances of inflation, like Argentina's for much of the last few decades, or Venezuela's, or Rhodesia's, or Weimar Germany's. Or even our own inflation through the 70s and into the 80s.

The problem was to not so much the inflation under Biden as such but the presence of meaningful inflation at all after the end of the "Great Moderation," the period of successful central banking ushered in by Paul Volcker after his appointment by Carter, carried forward by Greenspan (the financial crisis notwithstanding) and his successors Bernanke, Yellen and Powell. People have been spoiled by stable prices and don't know how to think about or cope with inflation. 

In his 1965 classic The Anatomy of Revolutions, which looked at the American, French, Russian and Chinese revolutions, Crane Brinton pointed out that revolutions don't start because things are really bad, but when things have been pretty good and then do downhill a little. People unaccustomed to adversity get riled up and go around a break things. Compound generalized displeasure with a pressure cooker of social media and you have a recipe for disaster. And here we are.

All I can say is thank God the central bankers were able to keep us clear of the deflationary threat that hung over our heads coming out of the financial crisis. If you think inflation is bad, try a few years of deflation and then get back to me.