Inflation was clearly scared of Margaret Thatcher, and who can blame it?
We have had to tolerate virtually no inflation since 1979, when Thatcher first came to power. There are all different kinds of measures used by just as many different kinds of economists to show this.
But I thought it would be fitting to have a look at the cost of the best suite at The Ritz today compared with the price when the Iron Lady first came to power, as it was in such a suite that Thatcher lived her final days.
In 1979 The Trafalgar Suite - the best one available at the time - would have cost as much as £500 (Dh2,813) a night. Today, a comparable suite goes for £1,100, according to the very nice man on the reservations desk at The Ritz on Tuesday.
Now, that may seem like a steep doubling of the price but you would need about £3,000 of today's sterling to achieve a similar buying power as £500 at 1979 prices.
So it seems to be the case that since Thatcher cured the rampant inflation that had stultified the economy in Britain and around the world with repeated doses of often brutal and bitter medicine, prices have in fact come down quite a bit in real terms.
Actual consumer prices data for the period shows that compared with the mega-inflation of the late 1970s - which had CPI running as high as 13 per cent in the United States and parts of Europe - since the early 1980s prices have risen at a steady 2 per cent to 4 per cent rate on average.
When you factor in similarly steady economic growth over that period, the official data chimes with the Trafalgar suite price experiment.
A great deal of this has more to do with a massive reduction in the cost of production achieved by exporting almost all of the West's manufacturing needs to low wage economies such as China and India. But still Thatcherite economic policy and so-called Reaganomics had a great deal to do with setting the stage for that seismic global shift.
However, things might be about to change.
No sooner had the old girl checked out of her suite at The Ritz than inflation seems to be edging out of its near 35-year hiding to begin preoccupying economists and central bankers the world over.
Nowhere was this more apparent than at the Dubai Precious Metals Conference, held at the Dubai Multi Commodities Centre on Monday.
The 300 or so gold dealers, traders and jewellers who gathered for the conference were all certain that we are heading for a period of inflation that will make the pre-Thatcherite 1970s look like a picnic.
But they were not at all dismayed by this fact. They were positively overjoyed at the prospect of yet more economic doom and gloom. For where there are bleak economic prospects, the price of gold will rise. They were simply talking their book.
When our current economic troubles began in 2008, for example, the price of gold was US$890 a troy ounce. Last September, when the wheels really came off the European charabanc, the price hit $1,922. It has come back a bit to the mid-$1,500 range of late as economic prospects, principally in the US and China, appeared to improve a little.
But if the gold bugs are to be believed it is heading for another upwards turn as soon as we start to feel what they believe will be the inevitable effect of rising prices.
Their simple argument is that the longer the US Federal Reserve and the European Central Bank persist with so-called quantitative easing - printing money - the more likely we will have to deal with inflation because inflation - as Milton Friedman said - is a monetary issue.
What's more, there is a growing chorus in the investment world that we need a bit of inflation to deal with debt.
But there is another view to consider.
What many savvy economists believe, and I tend to agree with them, is that Ben Bernanke, the Federal Reserve chairman, will not allow inflation to go above his 2.5 per cent ceiling. To prevent it getting out of control he will likely raise interest rates when it gets anywhere near it.
That, of course, will put the brakes on inflation but also on economic expansion, which will in turn warrant more quantitative easing, which will lead to inflation, which will lead to increased interest rates which will … you get the picture.
Margaret Thatcher's social and economic policies may not have been to everyone's taste, but somebody with her single-minded zeal needs to take control of the global economic recovery.
Unless they do, we will be bound to wander aimlessly in a hinterland that refuses to face the consequences of excess, and in doing so fails to restore growth.
jdoran@thenational.ae
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Started: 2019
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