Inflation is inevitable counters Wolfensohn

By Chrystia Freeland
October 12, 2010

While Laura Tyson thinks America has no intention to inflate away its debt, former World Bank President Jim Wolfensohn said in an interview today he believes inflation and a devaluation of the dollar are “inevitable”:

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Countries that get into heavy debt find that other countries realize that their currency isn’t as valuable as it was because they owe so much money. So the currency devalues. As it devalues, you have an inflation. And it is my judgment that that is likely to be a very important element in how we unwind this whole issue of debt to income levels in the United States.

Wolfensohn has a similarly gloomy outlook for Africa, a continent whose development he championed during his tenure at the World Bank. African institutions and governance are less efficient and effective than their counterparts in India and China, he says, and growth will suffer as a result:

I think [a coming African miracle] will happen in some few countries, but I do not think it will be anywhere near the speed that it needs to be. And it worries me enormously that you’ll have 2 billion out of 9 billion people on the planet so far behind. And they’re not running around carrying spears and hunting — they all have cellular radios, they’re all linked with the rest of the world. It’s a very different Africa, and I think we spend far too little time thinking about our responsibilities to Africa but also the role that Africa is going to play in the world of my children.

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Posted by Peter Rudegeair

3 comments

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no matter, what it is approaching the time when we have to live within the means of our planet sustainably and such a place requires redundant systems and disaster immediate relief forces and supplies and localized and segmented survivability in casse of transport disruptions and none of these things allow for vast inequities of wealth and billionaire pet causes largess! it calls for the end of Billionaires…

Posted by wildthang | Report as abusive

“and none of these things allow for vast inequities of wealth and billionaire pet causes largess! it calls for the end of Billionaires…”

Good luck with that one.

Posted by JohnF500 | Report as abusive

Why does no one seem to acknowledge that inflation is not only inevitable, it will sooner or later destroy the global economy. The reason for this is that profit is mathematically impossible without continual economic growth and economic growth in turn is mathematically impossible.

It is quite simple, if you think of it like this:

All of the employers in the world, including the self employed, government departments etc pay their employees, their suppliers, those who provide various services and themselves X billion dollars. After a given time, assuming that a percentage of these employers are businesses and expect to make profit, they need revenue of X Billion plus whatever return they expect (lets say 10%). Where does the 10% come from? There is no possible source for it.

When economies were smaller national affairs, it was possible to bring revenue from another country. Today with a global economy, there is simply nowhere left to expand to. The only solutions are credit and printing money. But eventually as we are all now only too aware, credit has to be repaid. We have no where left to go now except runaway inflation.

Posted by jbinfrance | Report as abusive