For most of our lives, it felt natural to assume that prices would always rise. Inflation was just part of living in a capitalist economy built on constant growth. If it crept too high, the usual suspects—government spending, too-low unemployment—were blamed. And when inflation crossed the sacred 2 percent line, the Federal Reserve was expected to twist its big imaginary thermostat: raise interest rates, “cool down” the economy, and accept the collateral damage of lost jobs or even a recession.
But the last few years blew that simple story apart.
A New Inflation Puzzle
During and after the Covid-19 pandemic, prices jumped at a pace rich countries hadn’t seen in 40 years. In June 2022, consumer prices in the U.S. were up 9 percent over the previous year. Former Treasury Secretary Larry Summers argued that only engineered mass unemployment could bring inflation back down.
Others disagreed. Paul Krugman said the spike would be temporary. Economist Isabella Weber pointed fingers at corporate pricing power—“greedflation”—and even floated the once-taboo idea of price controls. A surprisingly public debate erupted over what was really driving prices higher—and what should be done about it.
Inflation quickly became the political issue of the 2024 presidential election and continues to shadow policy debates today.
A New Guide for a New Era
In their book Inflation: A Guide for Users and Losers, economists Mark Blyth and Nicolò Fraccaroli use this turbulent moment to revisit the history, theory, and politics of inflation. They unpack how we measure prices, why those measures matter, and why many of the standard economic stories—from wage-price spirals to the omnipotence of central banks—don’t quite fit the world we live in today.
One of their core arguments: inflation is not one thing, and treating it like a single phenomenon leads to bad policy.
Good, Bad, and Ugly Inflation
Borrowing Sergio Leone’s famous trio, the authors break inflation into:
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Good – moderate and stable, a side effect of growth
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Bad – driven by temporary shocks like supply-chain snarls
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Ugly – when inflation becomes self-fulfilling because expectations unravel
Blyth and Fraccaroli are particularly tough on the idea that inflation spirals because workers have the power to demand ever-higher wages. In most modern economies, they argue, this just doesn’t reflect reality.
Why the Usual Fix—Rate Hikes—Falls Short
The book’s biggest target is the dominant belief that the cure for high inflation is always higher interest rates. This logic rests heavily on the mythology of the 1970s and Paul Volcker’s brutal rate hikes—pushing rates to 20 percent, triggering a deep recession, and crushing worker power.
Blyth and Fraccaroli don’t deny that Volcker’s approach eventually coincided with lower inflation, but they question how much of the economic suffering was necessary—or effective. Latin American economies, saddled with dollar-denominated debt, were hit especially hard, losing a decade of growth.
If raising rates is a hammer, the authors argue, central banks have treated every inflation problem like a nail—even when it wasn’t.
What About Price Controls?
The authors revisit a policy economists love to reject: price controls. Unthinkable today, they were used successfully—if briefly—by Richard Nixon in 1971, when he simply froze all prices and wages. The policy’s initial success, they note, collapsed only when the controls became voluntary.
Blyth and Fraccaroli explore modern versions of price intervention, from windfall taxes to subsidies like Germany’s recent “gas price brake,” and argue that inflation often requires a mix of tools, not just unilateral central-bank action.
Hyperinflation Isn’t Just “Printing Too Much Money”
Turning to Venezuela, Zimbabwe, Argentina, and the Weimar Republic, the authors show that hyperinflation is always a multi-causal disaster—not merely governments “printing too much money.” Oil shocks, political turmoil, and structural crises usually do more damage than the money printer itself.
Inflation as Class War—But Not in Simple Terms
Inflation disproportionately hurts lower-income households, who spend most of their earnings on necessities. But the traditional cure—rate hikes—hurts workers too by intentionally raising unemployment. Meanwhile, inflation can help debtors (including young homeowners with fixed-rate mortgages) while hurting creditors.
The result is a complicated picture: inflation is a class issue, but not a straightforward one.
The Future: Deglobalization, Climate Change, and New Inflation Pressures
The authors note that the low inflation of the past few decades wasn’t magic—it was globalization, especially China’s entry into the world economy. Cheap labor kept prices down. As that era unwinds, the downward pressure on prices may go with it.
Add climate change—higher food prices, disrupted housing markets—and we may be entering an era of persistent, unfamiliar inflation pressures that interest-rate hikes won’t fix.
A New Inflation Playbook
If the Covid-era price spike was “bad” inflation—driven by supply shocks and opportunistic price hikes—then future inflation may be even harder to control. Blyth and Fraccaroli argue that old tools, wielded by central banks alone, won’t be enough. Tackling tomorrow’s inflation may require more political coordination, more policy experimentation, and a willingness to question long-held economic assumptions.
In other words, the inflation story isn’t over. But the old narrative definitely is.