Inflation is a miracle

There are two Bibles dealing with the miracle. The Bible of Christians and that of Hume. The 1D Bible tells us about a guy who walked on water. The 2e Bible tells us it’s probably a canard. As for Grigori Perelmanthe serial Russian genius, he will explain that when he was very young he tried to calculate the speed at which Jesus had to walk on water in order not to fall into it. A way of reconciling the myth with the laws of nature.

What about inflation then? We spent almost 40 years of inflation between 1 and 2%, and suddenly here we are at 4%, then 5%, and today 8% or even 10% for some. Are we dealing with a miracle? Mere coincidence or implacable necessity? David Hume, one of the founding fathers of empiricism (skeptical version) will adopt a very minimalist approach allowing to decide between several interpretations of a divisive fact:

“one must always reject the greatest miracle”.

The divine is not summoned

Is inflation a miracle? A first answer retains the divine as a necessary and sufficient cause for inflation, since the laws of nature would be incapable of explaining the fact. If we accept this demanding definition of a miracle, inflation cannot be called a miracle. Indeed, inflation did not resort to the divine or the supernatural to spring from nowhere. Inflation has only increased because there has been an abysmal imbalance between, on the one hand, the supply of goods confined (Covid crisis) then confiscated (Ukrainian conflict) and rationed (climate crisis), and on the other side demand kept afloat by the authorities (whatever the cost).

No recourse to the divine in this story, just mechanics: when supply is lower than demand, then prices go up; when the supply is really lower than the demand, then the prices fly away. Inflation is not a miracle, just a supply-demand problem, especially supply and so little demand. On this subject, we should stop drowning ourselves with Biden checks. They probably put a little butter in the spinach of the Americans, but not enough to transcend his man. More purchasing power, yes; but no Super power of purchase. The Biden checks are a detail in the US inflation story. Generally speaking, the support policies of the various countries explain at the margin the differences in inflation between these same countries. Because the bulk of the acceleration of inflation is explained above all and everywhere by the shortage of supply. There again, the miracle is not summoned.

The true clinamen causes the inflationary miracle

Can we still say that inflation is a kind of miracle? It would be a miracle less flashy, less demanding than one invoking the divine. The miracle in question here would invoke only the plausibility of the fact, its likelihood. In our case, inflation was unlikely, but it did happen, so inflation would be some kind of miracle. Indeed, inflation was unlikely, just bad luck in truth, the result of a bad series as we have never known. Just think: what was the probability that a global health crisis would force the planet to go into apnea for almost 2 years, and even more if we think of China and its zero tolerance policy? How likely was a major geopolitical crisis to come knocking on the West’s door again, and even more so considering China and its views on Taiwan? Certainly, the likelihood of a climate crisis generating disasters here and there already seemed higher.

In short, inflation was not impossible, but largely improbable since it presupposed the quasi – joint realization of the 3 aforementioned catastrophes. Nothing predisposed the world to deviate from its cushy trajectory, hitting the dividends of peace and progress, the best was yet to come. Except that there was deviation(s): the DETOUR health, the DETOUR Ukrainian, and DETOUR climatic. This type of unpredictable deviation has another name popularized by Lucretius in his book on ” the nature of things (book II): the clinamen. Lucretius explains that the clinamen describes the way in which atoms falling in a straight line are caused to bump into each other in an unpredictable way, and thus break their trajectory, exercising a form of “freedom torn from fate”. Yet it was inconceivable that it was, but it was. In the absence of a clinamen, the world would probably have continued its long quiet river, and inflation would have continued to creep between 1 and 2% for years probably, recalling at the same time another form of miracle: how inflation has could it have remained so weak, for so long, despite all the money injected into the system by the authorities? A mystery at least as deep as the one surrounding wild inflation today.

In conclusion of this article which is meant to be recreational, inflation would therefore be a miracle. Not a miracle of the same type as the bilocation of the Virgin Mary, but a miracle of the same type as winning the lottery twice in succession. The problem with the implausible is that it lives on the same floor as the optical illusion. This remark is not insignificant for our central bankers who see inflation, but do not believe it, as if they doubted that inflation was too high to be honest. As a result, one may have the impression that central bankers are showing their teeth, but not really biting.