In mid-2021, Lord Mervyn King, former Governor of the Bank of England, joined our podcast and was almost singular (compared to other experts) in predicting the inflation that we see today. Now, as we look back on 2022, he rejoins us with a somewhat more optimistic outlook on what may happen next.
King, Bethany, and Luigi go back to the basics to unpack what was foreseeable, and what was less so. How did "too much money, too few goods" cause today's inflation? What were the effects of energy shocks, the COVID-related labor market, and what might be the implications for asset prices, wages, and interest rates, among other things? They discuss the successes and pitfalls of economic models, the risks ahead in policy approaches, and the political pressures that might impact their implementation.