Inflation has surged to its highest levels in 40 years across most of the developed world. The two obvious questions are, ‘why has inflation increased?’ and ‘what is to be done about it?’. Most of this article will be concerned with the first question. If the diagnosis is successful, it should suggest prescriptions to address inflation that can be brief and to the point.

The causation of the latest bout of inflation is controversial. In most leading nations, central banks recognise an inflation