[quote=Rich Toscano]
Yes, this is a good description, Fearful. I’d also add that high inflation reduces economic growth and productivity, because prices (which usually function as a signal for how to allocate resources) become distorted.

High inflation (and most notably the move from lower inflation to higher inflation) is highly disruptive and very negative for general economic well being, as one can verify by studying past episodes of inflation in our country and elsewhere.

This thread (the OP anyway) is a good example of the extreme complacency about inflation that seems to be the norm these days.[/quote]
I suspect the near zero overall inflation of 2007-2008 got people thinking “it can’t happen here”. But wasn’t there a brief period in which inflation was suddenly destabilized? I remember food and commodity price rises.

I also suspect that the low interest rates (“liquidity trap”) has gotten people thinking, again, that inflation will not happen any time soon.

I think technically that high inflation could be tolerated if it were stable. The economy could plan for it. However, I think it would be almost impossible to stabilize inflation expectations at some high level such as 10-20%.

Jeez – a little uptick in interest rates, the Fed’s inventory of securities is worth less, so the Fed can’t sell them without making the quantitative easing permanent … it is a precarious position.

Doesn’t complacency about inflation make its existence that much more likely?