QED 115: the (not) vain pursuit…
You will remember the winged words of the best of all possible vigilantes :
In May 2022, when the LVI was still in place, Visco issued a warning, something vaguely Quirinale-esque, along the lines of "don't invoke the defense of purchasing power to demand wages be adjusted to prices." So far, so obvious: we can't expect the euro's best friends to demand a call to combat wage deflation! The fact remains, however, that I've repeatedly pointed out that this government had… let's say, ignored the lofty words of the best possible watchdog, recording the highest rate of real wage growth, and therefore the most successful pursuit (and overtaking) of prices by nominal wages. We've seen this here and here , pointing out that with a similar growth rate, we would have even returned to pre-Monti levels by summer 2026, and we'd still substantially recovered from the impact of the latest inflationary shock.
Two days ago, we also received a letter from the Bank of Italy, the best national supervisory body among all possible national supervisory bodies, which told us what you have known here for a while , namely that:
the latest inflationary shock has now been substantially reabsorbed, for the reasons mentioned several times here (the interventions to cut the wedge, the boost to nominal wages given by the reduction in the unemployment rate, etc.).
To be clear, when Visco issued his prophecy we were in the blue dot highlighted here:
And the euro's best friend essentially let us know that he thought there was nothing to be done, and indeed nothing was done. Real wages (purchasing power) fell further, then the tune changed and we reached and surpassed his comfort zone (which wasn't ours).
Naturally, the left's terrifying narrative continues, but ISTAT's investigations reveal that:
Household and business confidence is rising, and this, not the terrible narrative, is consistent with the fact that real wages are growing and unemployment is decreasing.
For anyone who's just logged in: so I'm saying everything's fine?
Well, no, I'd say absolutely not. It's not good, because wages have been flat since the 1980s, as we all know here:
(We last discussed this here , where I also cite the first time we discussed it), and productivity has nothing to do with it, because it flattened out afterward. What could possibly be the cause? The one indicated in the textbooks, namely monetary integration, which for a country with a perceived weak currency naturally implies a strong exchange rate policy, a standard instrument of wage discipline, as Acocella's textbook reminds us:
But we have talked about this many times here: those who wanted to understand it have understood it, and those who didn't want to understand it won't understand it even when they (don't) reread it in the reprint of The Decline of the Euro (at the end of October).
I declare the general discussion open, I'm running away because I have a minister not for dinner, but for an aperitif…
This is a machine translation of a post (in Italian) written by Alberto Bagnai and published on Goofynomics at the URL https://goofynomics.blogspot.com/2026/01/qed-115-la-non-vana-rincorsa.html on Wed, 28 Jan 2026 17:46:00 +0000. Some rights reserved under CC BY-NC-ND 3.0 license.