PRINCETON – Can central banks contain inflation? We once thought they could. Over the past 20 years, central banks around the world, including the United States Federal Reserve, pursued price stability with remarkable success. But now, in the wake of the financial crisis, a tide of distrust is sweeping the world – including a new and widespread fear that central banks are incapable of controlling inflation.
In the US, the Tea Party has made a return to the gold standard a part of its platform, and Utah is debating making gold and silver coins legal tender. German inflation worries have pushed the government into a much harsher stance on debt relief in Europe. In China, fear of inflation is unleashing large-scale discontent.