Macroscope | Central banks are stoking the dangerous fire of inflation

The G20 summit missed the chance to examine a crucial issue: Inflation has not gone away, it is hiding in plain sight, in inflated asset and stock prices. Given towering debt levels and slowing manufacturing, more easing will only stoke inflation

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A meat stall in Beijing. Inflation in the price of everyday goods has not taken off, despite a decade of easy money. But this is no cause for celebration. Photo: EPA

Published: 3:00am, 1 Jul 2019Updated: 3:20am, 1 Jul 2019

The world's biggest central banks, having been on a money-printing binge for years, are about to embark on a fresh round, it seems. Yet inflation is nowhere to be seen, which appears to suggest that the money is disappearing into a giant sink hole or new kind of black hole that physicists have yet to identify.

This phenomenon did not get the attention it deserved from world leaders when they gathered for the G20 summit in Osaka last weekend. Their gaze was diverted by threatened wars (hot and cold) and the agenda was arguably overloaded anyway by a Japan eager to make its mark in global affairs.

But the consequences of profligate money-printing will thrust themselves upon world attention probably not far down the road. They are like the unseen but massive roots of a tree that threaten to undermine and topple the house – or global economy – it is supposed to shade.

Such risks to the delicate, and false, equilibrium in which the global economy is poised at present ought to be obvious. But policymakers are either ignoring them (hoping they will go away) or have just too much on their plates with trade and currency wars to pay much attention.

Some of these concerns were voiced during an expert discussion I moderated at the Foreign Correspondents’ Club of Japan last week. Once monetary policy is tightened, there could be a repeat of the 1997 Asian crisis, warned the dean of the Asian Development Bank Institute Naoyuki Yoshino.