Home Capital Tong's Portfolio

Central banks cannot address supply disruptions, the cause of global inflation

Tong Kooi Ong and Asia Analytica
Tong Kooi Ong and Asia Analytica9/23/2022 12:22 AM GMT+08  • 14 min read
Central banks cannot address supply disruptions, the cause of global inflation
Photo Credit: Bloomberg
Font Resizer
Share to WhatsappShare to FacebookShare to LinkedInMore Share
Scroll to top
Follow us on Facebook and join our Telegram channel for the latest updates.

We are who we are, shaped by our past experiences and the lessons we learn from others. Similarly, today’s decisions on economic policies are heavily influenced by historical events, and the thinking and theses of economists-academics of the past.

From the 1930s, economic stability was largely driven by the ideas of British economist John Maynard Keynes (1883-1946). He advocated countercyclical fiscal policies, for the government to step in when market forces fail to do the job. In other words, governments should act to counter normal business cycles — spending more during recessions but also reining in excesses during boom times.

The problem is, everyone is a Keynesian during bad times — pump priming the economy to boost aggregate demand — but far less so during good times. This is especially true in democratic countries where politicians are loath to make the tough decisions that inflict pain on the people. Taking away the punch bowl in the middle of the party is never popular. As a result of rising fiscal spending, by the late-1960s, global inflation was running high and morphing very rapidly into a major problem.

For more insights on corporate trends...
Sign In or Create an account to access our premium content.
Subscription Entitlements:
Less than $9 per month
Unlimited access to latest and premium articles
3 Simultaneous logins across all devices
Bonus unlimited access to online articles and virtual newspaper on The Edge Malaysia (single login)
Loading next article...
The Edge Singapore
Download The Edge Singapore App
Google playApple store play
Keep updated
Follow our social media
Subscribe to The Edge Singapore
Get credible investing ideas from our in-depth stock analysis, interviews with key executives, corporate movements coverage and their impact on the market.
© 2022 The Edge Publishing Pte Ltd. All rights reserved.