Understanding inflation in the US

Lessons from economics and history need to be applied appropriately by the public authorities to the changing situations

The inflation rate in the US touched 8.6 per cent in May. This is more than four times the 2 per cent target rate and at a 40-year high. In order to understand the present, we need to first consider the past. 

During the Great Depression of the 1930s, real per capita gross national product fell by one third in the US. Also, there was 25 per cent negative inflation, and a massive shift from bank deposits to currency. Over one-third of the banks failed. In 1936, John Maynard Keynes gave legitimacy to additional public spending through large fiscal deficits in