Inflation and the End of Illusions

I _think_ this maybe gets the relationship backwards.

Under the previous austerity, low gov't spending regime following the financial crisis, wages and employment stagnated. Large numbers of low income workers took on part-time or contracting work to make ends meet. The low-demand environment kept prices low (inflation stayed below 2%), but also disincentivized expanding capacity.

If demand had been maintained during the financial crisis through government spending, we may have seen slightly higher inflation during that period (closer to the 2% goal the Central Banks target), but the higher demand would also create the incentive to invest more and expand capacity.

Companies are seeing that incentive now, but it's happening as a sharp adjustment rather than a more gradual and steady growth curve. It's also happening at a point when post-pandemic shocks and wars are further disrupting supply.