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Analysis: Inflation thrives in our era of mistrust
Today's inflation problem is largely based on the increased mistrust in society, where everyone tends to defend their own interests. That's what Bloomberg's John Authers writes in an analysis.
"Corporate leaders want to keep profits up, which is what their shareholders pay them to do, while union leaders want to maintain the standard of living for their members," he writes.
Both groups act logically, but the problem is that prices continue to rise if no one gives way. Both companies and workers would have benefited from a compromise where they share the pain, but it would have required a trust that is currently rare, Authers writes.
His solution is that inflation begins to be seen more as a moral than an economic challenge.
Economics laureate Paul Krugman makes a similar argument in the New York Times by quoting economist William Nordh. He compares inflation to what happens when a goal chance arises in football. Everyone in the arena lines up to get a better overview, which collectively becomes self-destructive as everyone gets obscured vision instead.
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