What is the level of inflation that allows each citizen to live at an adequate standard of living? What are the causes of inflation that is too high or too low?
In this study, Gilles RAVEAUD provides answers on the “Very High Inflation” observed in France over the period 2022-2024; leading to a sharp decline in the standard of living of the French.
First of all, he questions the measurement of inflation by INSEE, which seems to underestimate the rise in prices and overestimate the rise in income. INSEE uses the CPI (consumer price index) but should use the European HICP index (harmonized index of consumer prices), which would be more faithful to the real structure of household consumption although it would mean a sharp increase in public spending.
The latest price increases have mainly concerned food and energy, following the Russian invasion of Ukraine in 2022. In addition, he also believes that inflation is due to excessive profits over the period and not to wage increases. Indeed, according to the author, the “Very Great Inflation” in Europe over the period can be explained by corporate profits, which account for almost half of the increase. The latter are accused of having taken advantage of the energy shock on their costs to increase their margins. This was also observed by the IMF, which posted in June 2023: “the increasing profits of companies have been the main contributor to inflation in Europe over the last 2 years “.
The author then focuses on the centralization of the European electricity market and the setting of its price. He criticises the fact that the sharp rise in electricity prices in 2022 is linked to the sharp rise in gas prices in Europe. Mario Draghi also made the observation: “gas produces only 20% of European electricity, but it dictates prices 63% of the time”
The ECB saw inflation as a serious and immediate danger that it had to fight. The ECB therefore raised its interest rates in order to penalize credit and consumption.
This monetary tightening has had a major impact on the real estate sector. ”In 2024, only 250,000 homes were built in France, an unprecedented level since …1960 “. The victory over inflation has reduced access to property for many first-time buyers.
In summary, the author presents 7 proposals to allow France to take its destiny back into its own hands and to be more in control of its public debt, its industry and its agriculture, with the guarantee of a minimum purchase price, among other things.
He does not hesitate to reshuffle the cards of the great principles that govern our economy and those of the central bankers. The reader will be able to find well-defined opinions through reasoned analyses and thus continue the perpetual debate on inflation.
Gilles RAVEAUD is a lecturer in economics at
the Institute of European Studies of the University of Paris 8-Saint-Denis.
Sophie FRIOT