The current inflation tensions bring us back to the past. For those of you who are old enough to remember, you’d have to go back to the early 80s and even the 70s. That’s if you lived in a developed country like the US or Europe which was only a part of the world but the biggest share of the world economy. (Listen to the podcast post here)
In any case I can look back at the last 50 or 60 years, because it is personally as far back as I can look. I belong to a generation which actually experienced the various phases of inflation cycles. For those of you who belong to a much younger generation, then it’s important for you to learn from that period. Bear with me, this is not about lecturing you or telling you that you don’t understand enough about life. Far from it. I believe that current generations have a lot to teach older generations.
However in that exchange of wisdom between generations perhaps one of the biggest lessons is about how to go through these periods of life where prices become unpredictable. When the price of bread or coffee, or sugar, in other words, when the price of basic necessities become unpredictable, then it shakes the very foundations on which you build the rest of your existence, physically and mentally.
Indeed price stability is an important element of life because it determines how you’re going to be able to sustain yourself and to fulfill your basic needs. In the Maslow pyramid of needs, there are 8 levels starting from the basic physiological needs all the way up to transcendence. Indeed, in the first 4 levels in that pyramid, Maslow determined how your ability to respond to a material deficiency (food, sleep, basic resources, housing, breathing, water) could help you create a sense of self-confidence that would propel you higher and express your inner gifts through friendship, love, family, self confidence, self expression. In other words, from that basic fulfilling of needs, you create the foundations that will sustain your-self realization.
So inflation is a crucial topic for humanity as a whole. It concerns us all and it’s the kind of discussion that deserves a lot more attention, even though it sounds boring. So my goal here is to avoid any technicalities and provide you with the key tools that will allow you to follow what is happening. My discussion here will focus on a historical review that spans a period that I actually lived and witnessed. I witnessed what I am about to talk about in various circumstances and I will mention it when it’s necessary.
It’s also crucial to focus on history because, you will notice by yourself, certain similarities with what we are going through right now.
So if you live in a rich Country, the phases I am about to describe have played a major role.
1973-1979-1982: Kippur War, Iranian revolution, Gulf War
German Reunification and Other European Countries
Current episode with COVID 19
And if you live in an emerging and vulnerable countries, then it’s all of the above plus these additional factors:
Interest rates policies (US$)
Energy and Commodity prices
This is the model I wanted to share with you. My next post will focus on the tools we use to measure inflation.
Let me know what you think. Feel free to comment and I will reply.