▲ Corona 19 confirmed and cumulative deaths around the world (Photo = The New York Times)

It will soon be a year since the outbreak of Corona 19 in Wuhan, China at the end of last year.

As of the 13th, the number of corona 19 confirmed cases around the world is heading to 100 million, over 71 million, and the deaths from Corona 19 also exceeded 1.6 million.

The number of corona 19 confirmed cases in Korea is also reaching the worst, exceeding 1,000 a day, but for the past year, as the corona 19 vaccines of global pharmaceutical companies Pfizer and BioNTec were officially approved in the United States following the UK. Light began to appear at the end of the dark tunnel of Corona 19, which restricted the activities of all mankind.

The gloomy economic situation during the first major spread of Corona 19 in March, when stock and oil prices plummeted amid the worst economic situation after World War II, is now becoming a forgotten past.

Stock prices in the US as well as in Korea are hitting record highs every day, and real estate prices are rising differently from day to day, causing the pain of those who could not afford a house.

Korea's exports, which had been declining, turned to an increase again, and the current account surplus of $11.6 billion in October reached the highest level in three years and one month.

In its November Economic Outlook Report, the Bank of Korea predicted that Korea's economic growth rate will record negative for the first time since 1998 at -1.1% this year, but it will show a rapid recovery next year and record an annual growth rate of 3.0%.

In Britain and the United States, it is argued that the'inflation monster' will reappear once Corona 19, which threatened human survival, passes.

It is a warning that the nightmare of the 1970s, when the inflation rate of advanced countries reached the 10% level due to the oil shock, will revive.

The controversy over the inflation reenactment was on Dec. 3, when former New York Federal Bank Governor and Fed Vice Governor Bill Dudley told Bloomberg in an interview with "Corona 19, when demand increases next year. It can be inevitable.”

The next day, on December 4th, David Andolfatto, vice president of research at the Federal Bank of St. Louis, added, warning that "Americans should be prepared for inflation."

Morgan Stanley's economists predict that inflation in the second half of 2021 will exceed the Fed's target of 2%, and if the central bank fails to respond in time, the era of inflation like the 1970s is likely to arrive.

The reasons for their prediction of inflation are the rapid expansion of the money supply, changes in the demographic structure, and changes in the attitudes of monetary policy makers.

According to the British Economist, the assets of the US, UK, Japan and the European Central Bank have increased by 20% this year.

It means that a lot of money has been released on the market to support the government's fiscal policy to cope with Corona 19.

Unlike the 2008 financial crisis, when the financial crisis of 2008, when large-scale insolvent financial institutions were released to increase capital, the money that the central bank made this year went into the pockets of companies and individuals as unemployment benefits, leave allowances, and cash benefits.

Companies' lending has also increased significantly.

It is analyzed that if the Corona 19 crisis is resolved next year, consumption, which had been suppressed, could rapidly increase, and inflation will occur as demand for goods and services that have reduced supply capacity due to Corona 19 surges.

Studies have shown that after the pandemic sweeps, inflation will come.

Researchers at the Bank of England have looked at inflation over the past 800 years and found that inflation has occurred after the outbreak.

It is analyzed that the Spanish flu from 1918 to 20 also contributed to inflation in part.

Even this year, overseas transportation costs have risen since Corona 19, and iron ore prices have risen by more than 60% from the beginning of the year.

In his book The Great Demographic Reversal, published last summer, Charles Goodhart, Commissioner for Monetary Policy at the Bank of England, and economist Manoj Pradhan, published last summer's book The Great Demographic Reversal. Insisted that it must occur

Goodheart and Pradan argue that the low inflation that has persisted since the 1990s is not due to the proper monetary policy of central banks, but to the influx of millions of new workforces from China, Eastern Europe and other emerging markets.

These low-wage workers have taken away the wage bargaining power of workers in developed countries, and the price hike of commodities due to the pressure to increase wages has become an old saying.

It is analyzed that the recent low inflation rate was ultimately possible due to the price stabilization of products produced overseas.

However, the two argue that the number of dependents per worker increased as the aging of China and advanced countries progressed together, and the low inflation phenomenon that depended on these low-wage foreign workers is no longer possible.

There is already a shortage of manpower, mainly in nursing homes and other care industries.

There are many young people in Africa and India, but developed countries have immigrated barriers to prevent the influx of these workers.

Eventually, the wage bargaining power of workers in developed countries will be strengthened, so that wages will rise and prices will rise, and this phenomenon is expected to become a new global trend that will ease the widening social disparity.

Japan, a representative aging country, is concerned about deflation rather than inflation despite the government's various economic stimulus measures, as it is analyzed that the bargaining power of home-country workers declined as product prices were suppressed by using cheap overseas labor through foreign investment. .

The third factor that inevitably causes inflation is the change in attitudes of policymakers toward inflation.

They say that governments and central banks are more concerned with stimulating the economy than worrying about inflation.

Inflation in the 1970s was tackled by strong monetary tightening and interest rate hikes by Paul Volcker, who became president of the US Fed in 1979.

Since then, there has been a belief that an independent central bank will endure inflation with strong monetary policy despite the economic recession, which has contributed to price stability.

However, they argue that the central bank's policy tone has changed.

The COVID-19 outbreak has made policy cooperation between the government and the central bank higher than ever, and governments with enormous debts want to reduce the debt burden by promoting inflation.

Considering that the central bank governor, the head of monetary policy, is eventually elected by a politician elected by voting, it is also diagnosed that it is not easy for central bank governors to use an unpopular inflation control policy.

As inflation has not appeared since the 1990s in most developed countries, it seems difficult to abandon the low interest rate policy to curb inflation when the risk of high prices is not felt.

The fact that the U.S. Fed announced that it would tolerate an inflation rate of more than 2%, which has been regarded as the Maginot line so far, for sufficient economic stimulus, is also supporting this argument.

The British economist, however, reported that the outlook for most developed countries to fall below 2% next year is dominant.

Even among economists, the idea that inflation does not occur is prevailing simply by increasing the money supply.

Consumers' expectations of inflation and the elasticity of the labor market dictate inflation, both of which are aimed at low inflation.

The results of various surveys and trends in the financial market showed no signs of a sharp inflation.

The prevailing prospect is that it will take several years for employment to recover to pre-Covid-19 levels.

Goldman Sachs, which predicts that the economy will recover rapidly next year, is also analyzing that the unemployment rate in the United States will drop below the 4% range until 2024.

In most developed countries, the real economic growth rate is below the potential economic growth rate, so there are few factors for wage increase.

JPMorgan Chase predicts that next year's core inflation rate will be 0.5%p lower than before the coronavirus.

Inflation concerns that were raised as the money supply exploded after the 2008 financial crisis ended in tumult.

However, with an unprecedented amount of money released, it is impossible to know when the expectation of a price increase will explode.

The so-called'young investment' craze that has recently emerged in Korea shows that the specter of inflation can revive at any time.

As many companies and households go bankrupt due to Corona 19, the supply of goods and services has been considerably reduced, and the voice that some short-term inflation is inevitable is gaining momentum if demand surges.

Inflation devalues ​​money, eroding the wealth value and spending power of wage earners and deposit holders.

By expanding uncertainty about the future, it undermines trust, the basis of economic activity.

In the short term, the price of real assets may increase and the asset value may increase, but it may lead to a rise in the nominal interest rate and burst the debt bubble.

Even if it is not a sharp rise in inflation, it is predicted that a certain level of interest rate rise will be inevitable if the expansive fiscal policy to overcome Corona 19 is completed and the scale of fiscal execution is reduced.

It is also predicted that China, which was also the world's capital supplier, with a huge trade surplus as the world's largest supply of goods, will emerge as a capital demander as it focuses on domestic demand.

The recent inflation debate will be one of the warning sounds that it is time to set a strategy, how to solve the debts of households, governments and corporations, which have grown rapidly to the largest ever.