They are the pivotal moments, the personal turning points that changed most of our lives.
The adventure that could have been, the job that was turned down or the chance encounter with someone from the other side of the planet that took you down a completely unexpected path.
Sometimes the choices are compulsive and immediate. Other times they’re based upon long and difficult decisions. And occasionally, we make mistakes.
They’re often the “what if?” moments.
But what if those “what if?” moments affect entire nations? What if the decisions those in control are making are based upon a mistake or a misinterpretation?
Take the present as a case in point.
Our economic masters are convinced that inflation needs to be returned to between 2 and 3 per cent and that the best way to do it is to jack up interest rates, regardless of how much pain it will inflict on a section of the population.
They figure that if it worked back in the late 1980s and early 90s when inflation went haywire, it’ll work again now.
But what if it was a range of other factors that, when combined with a sharp spike in interest rates, tamed inflation back in the 1990s and not just the actions of central bankers alone?
What if the resulting 30 year hiatus in consumer price rises was just an aberration?
Which leads to the logical final question: What if the 2 to 3 per cent inflation target is a goal that is unattainable and in the meantime we wreak havoc trying in vain to get there?
Do our central bankers have any idea what they are doing?
We all love to offload responsibility, to let those best qualified in their field to take charge and weave their magic.
But when it comes to economic management, global central banks have a pretty poor record.
They were sideswiped by the Global Financial Crisis despite the mounting evidence that preceded the meltdown in the global banking system.
They then stood back while bodies such as the International Monetary Fund made the situation worse by insisting that busted economies needed to slash spending, turning a crisis into a disaster.
Then they flooded the world with cheap money, turning 5,000 years of history on its head by sending interest rates below zero, before ramping up the program during the pandemic.
The end result was an explosion in asset prices such as real estate.
Then, two years ago, they denied inflation was even a problem, arguing the lift-off in consumer prices was transitory.
Our very own Philip Lowe has copped a hiding for his assurances that rates would stay on the mat until 2024.
But he’s in very good company amongst his peers and you could argue that his performance was hardly the worst.
US Federal Reserve chief Jerome Powell summed it up succinctly a few weeks back with this pithy quote.
“I think we now understand better how little we understand about inflation,” he said in a rare moment of clarity.
Despite all this, we still trust central bankers to deliver us back to a pre-pandemic world of low inflation when it all may be an illusion.
The dirty little secret about inflation
The conventional wisdom is that central bankers saved the world from high inflation back in the 1990s.
It was the culmination of an argument that took place in the ivory towers of academia in the aftermath of World War II.
Through the 1950s right through until the end of the 1970s, governments controlled the economy through spending and taxation, along the lines advocated by UK based economist John Maynard Keynes.
But big spending governments were blamed for the inflation scourge that ravaged the developed world in the 1970s.
The upshot was that Keynesian economics was dumped in favour of the Chicago School of Economics led by Milton Friedman.
Their idea was that governments should get out of the way of the free market and that central banks should run the economy.
Their views seemed to be vindicated by the triumph over inflation which was brought to heel in the 1990s when market interest rates topped 20 per cent and a recession raged across the developed world.
Amidst all the backslapping, the Reserve Bank of New Zealand came up with the idea of muscling inflation into a narrow band between 2 and 3 per cent by pushing unemployment to a level that would ensure demand was kept in check and wages wouldn’t grow.
It was adopted globally and central banks still adhere to that idea, that we need to have a pool of unemployed to keep consumer prices in check.
So they’re not castigated for being heartless bureaucrats, they gave it an unassuming title.
It’s called the Non-Accelerating Inflation Rate of Unemployment (the NAIRU) although, in true form, no-one can definitively pinpoint the required unemployment rate.
It’s a great theory, so long as you’ve got a job.
What economists forget about inflation
They’re loathe to admit this, but global central banks played a supporting role to the sudden disappearance of global inflation.
Interest rate policy was a key factor but it came about at a time when fundamental shifts in the global economy were working through the system.
The first was that China became the world’s factory, producing everything from socks and undies to heavy machinery at prices much cheaper than anyone else.
For the incredible range of goods it produced, China’s biggest export in fact was lower prices for almost everything which led to lower inflation.
It’s rise coincided with a push towards globalisation, allowing labour demand to shift from the developed world — thereby keeping a large pool of people unemployed — to a new, rapidly developing, economic power base.
That, in turn, allowed company profits to expand while developed world wages largely were kept in check.
Why inflation won’t be dropping to 2 per cent any time soon
It’s been a global race as every nation from Albania to Zambia has jacked up interest rates at a frightening pace.
The problem is that those primal global forces that helped undercut consumer prices during the past few decades are not only no longer in place, they’re moving in the opposite direction.
The peaceful era of economic co-operation is no more.
Globalisation has been replaced by a retreat to regional confrontation and a rise of nationalism.
Protectionism is on the rise, distrust has ditched dialogue and in the wake of a pandemic that exposed major shortcomings in thinly stretched global supply chains, more goods will be made locally.
That will come at a cost — elevating prices that will pump up inflation.
And while China may remain a major exporter to the West, its rapid transformation is reaching an end point.
Its exports no longer will undercut the West and replace industries.
Even if diplomatic relations were stronger, longer-term it will not be a major force in lowering costs across the developed world.
Then there are the yet to be tallied costs of global warming and the urgency required to shift to a low emissions world.
A complete new global build out of energy generation and transmission, low emissions transport and sustainable housing may help save the planet. But it won’t come cheap.
Let’s hope central bankers wake up to the fact other forces are at work and don’t just keep ratcheting up their required unemployment [NAIRU] rate to 20 per cent so they can meet their artificially created inflation target.
No-one wants that “what if?” moment in a decade’s time.