This is when things start to go sour. If central banks are wrong about the transient nature of current inflation, they will soon have to raise interest rates to maintain their credibility. This in turn could potentially lead to a loss of confidence in the ability of governments to finance themselves without abrupt tax hikes and / or economically destructive spending cuts.

Again, there are few signs of this in market thought yet, but let’s not talk too soon. “How did you go bankrupt? Bill asks in Ernest Hemingway’s The Sun Also Rises. “Two ways,” Mike replies. “Little by little, then suddenly. “

To add to this cocktail of negatives, we are seeing serious staff shortages in several sectors – from slaughterhouses and social services, truck driving, hospitality and agriculture. This is in part a deliberate consequence of the government’s new immigration policy, which excludes many forms of “unskilled” work from its “shortage occupation list”.

Rightly or wrongly, the belief is that depriving the market of an inexhaustible supply of cheap migrant labor will help raise wages, and thus make work more remunerative for the indigenous population. Tighter control of migrant labor was one of the promises of Brexit.

And for now, that certainly seems to be having the desired effect on wages.

Unfortunately, nothing is ever that easy. Perhaps having had too much work, we now seem to have too little, despite the more than a million people who are on the verge of losing their leave. Additionally, rising wages are inflationary and are already contributing significantly to the cost pressures we see elsewhere in the economy.

In a letter to the Chancellor last week, Andrew Bailey, Governor of the Bank of England, admitted that CPI inflation is likely to rise further in the near term, “to reach slightly above 4 % in the fourth quarter of 2021 “and then stay there for much of the first half of next year.