When people begin anticipating inflation, it doesn't do you any good anymore, because any benefit of inflation comes from the fact that you do better than you thought you were going to do.
Interpretation
Anticipating inflation can negate its benefits, as expectations influence outcomes.
This quote by Paul A. Volcker highlights the complex relationship between inflation and people's expectations. When individuals or markets begin to anticipate inflation, the original advantages of inflation—like improved performance beyond initial expectations—can be diminished. Essentially, if everyone expects inflation, it can lead to a self-fulfilling prophecy that undermines the positive aspects of economic growth related to inflation.
In practice
In a seminar about economic forecasting, this quote can shed light on the impact of consumer expectations.
The shortage of buyers, which the world is suffering from, is readily understood, not as due to people not wishing to obtain possession of goods, but as people being unwilling to part with something which might earn a regular income in exchange for those goods.
Inflation is probably the most important single factor in that vicious circle wherein one kind of government action makes more and more government control necessary. For this reason all those who wish to stop the drift toward increasing government control should concentrate their effort on monetary policy.
What an extraordinary episode in the economic progress of man that age was which came to an end in August, 1914!
Never in the history of human credit has so much been owed.
Socialism failed because it couldn't tell the economic truth. Capitalism may fail because it couldn't tell the ecological truth.
Markets as well as mobs respond to human emotions; markets as well as mobs can be inflamed to their own destruction.
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