Here’s a fantastic historical review of inflation by Columbia Business School Professor Frank Byrd. One of the best presentations about what really drives inflation.
The whole preso is well worth a watch. The best part is around minute 19, where Byrd makes a key point – which is that the cost of capital has been falling for three consecutive decades, in tandem with declining interest rates. Which means, nobody under the age of 52 has experienced a world with a rising cost of capital!
One part that surprised me is that Byrd says that net aggregate credit is actually up, not down, since the financial crisis began. This is counter to what I had believed – we’ll need to take a closer look at this metric.
Hat tip S&A Digest for the link!