The death of the hydra of inflation is also a myth.

Sir, Kenneth Rogoff’’s “The myth of how central banks slew the hydra of inflation”, August 30, correctly concludes after analyzing the effects of globalization that “there is some urgency in the need for central bankers to take greater pains to avoid taking too much credit for upside performance”.

I myself, in my book Voice and Noise, wrote a while ago that “to put some check on their egos, every time I see a central banker I urge him to take a shopping trip to the closest IKEA so as to see who really should get the credit of controlling inflation as we currently know it.” 

That said the issue is not really about who should get the credit for the death of the hydra of inflation, that is of secondary importance, as its demise might also have been a big myth. The way inflation is measurd by looking only at a cost of living basket while mostly ignoring the price of assets, might have in fact lulled us all into a very false sense of security. 

When Rogoff mentions “The advent of modern independent and anti-inflation oriented central banks is one of the great success stories of modern economic science” I also beg to differ. We should all know by now that placing your full trust into a non-accountable club of mutual admirers will, more sooner than later, induce incestuous thought processes that guarantee disasters.

When I also read in FT that “inflation-linked municipal bonds, a small and relatively unknown part of the US municipal bond market, have had a surge of issuance this year”, I start shivering at the pure thought of the consequences of having to restate inflation figures.