Global Inflation Dynamics: regularities & forecasts

TL;DR

The paper analyzes historical dollar inflation data from 1913 to 2012, identifying a critical point in December 2012, and warns of potential inflation surge and stagflation risks if global monetary policies are not controlled.

Contribution

It introduces a power-law model with log-periodic oscillations to predict inflation dynamics and identifies a quasi-singularity point in 2012, offering a novel analytical approach.

Findings

Potential inflation surge around December 2012

Risk of stagflation if no measures are taken

Urgent need for global monetary emission control

Abstract

The analysis of dollar inflation performed by the authors through the approximation of empirical data for 1913-2012 with a power-law function with an accelerating log-periodic oscillation superimposed over it has made it possible to detect a quasi-singularity point around the 17th of December, 2012. It is demonstrated that, if adequate measures are not taken, one may expect a surge of inflation around the end of this year that may also mark the start of stagflation as there are no sufficient grounds to expect the re-start of the dynamic growth of the world economy by that time. On the other hand, as the experience of the 1970s and the 1980s indicates, the stagflation consequences can only be eliminated with great difficulties and at a rather high cost, because the combination of low levels of economic growth and employment with high inflation leads to a sharp decline in consumption, aggravating the economic depression. In order to mitigate the inflationary consequences of the explosive growth of money (and, first of all, US dollar) supply it is necessary to take urgently the world monetary emission under control. This issue should become central at the forthcoming G8 and G20 summits.