Remodelling macroeconomics with asset prices instead of goods and services prices

Since the Second World War, economic cycles in OECD countries have been driven by inflation in goods and services prices: when unemployment became low, wages accelerated and inflation rose, bringing about a monetary policy reaction, higher interest rates and a recession. The recession eliminated the inflation, interest rates then fell and growth got going again. Today, however, we are seeing that: The unemployment rate no longer has any effect on inflation; Money supply growth no longer has any effect on inflation either. Inflation therefore no longer depends on either the cyclical economic situation or monetary policy. In reality, inflation in goods and services prices can be replaced by inflation in asset prices: economic growth (declining unemployment) and money supply growth may no longer drive up goods and services prices, but they do drive up asset prices (equities, real estate). Only one component is missing from the link between economic cycles and asset prices: a reaction by central banks, which would have to move from an objective of stability in inflation in goods and services to an objective of stability in inflation in asset prices .