The “inflation expectation” theory is the latest in orthodox economics’ inability to fully conceptualise and explain inflation. Global commodity price hikes and supply chain disruptions, therefore, have a strong impact on the domestic price level. A clear divergence between money supply and inflation is evident, alongside a correlation between currency devaluation and levels of inflation. Therefore, a combination of import dependency and a yawning trade deficit applying downward pressure on the exchange rate can be seen to be one of the primary causes of domestic inflation. As we have shown, the causes of inflation are often beyond the realm of money supply.

Source: The Nation October 05, 2021 21:33 UTC