Yet, this time, house-price gains have been associated with barely a ripple in inflationary expectations. I can add to this list the late-Nineties equity bubble, the strength of sterling, the global recession. These might have been expected to have influencedexpectations of inflation yet, for the most part, none has.There are four broad reasons behind this lack of any inflationary response. First, policymakers are unanimous that price stability is a necessary precondition of economic prosperity.

This belief is so enshrined that it isdifficult to find an external shock which might give rise to lasting inflationary consequences. Second, the growing independence of central banks has removed the last vestiges of short-term political opportunism and, thereby, has reduced the perceived risk of a pre-election inflationary boom. Third, globalisation, associated with heightened capital mobility and the introduction of cheap labour from China, India and Eastern Europe, has cut the bargaining power of labour in industrialised countries. Fourth, demographics are playing a social role: as the baby boomers age, the last thing they want is a return to the days of pension-destroying high inflation.Given these circumstances, what should governments and central banks do? They can certainly afford a collective slap on the back, because the commitment made to lowering inflation and inflationary expectations appears to have worked This, however, is not good enough. Policymakers need to recognise that economic policy problems did not begin with the arrival of inflation in the late-Sixties and early-Seventies. Before then, even if inflation was broadly quiescent, there were policy problems aplenty.What are the other things policymakers should worry about? For central banks, the obvious things to cause sleepless nights are asset-price bubbles and their consequences for debt levels.

Any attempt to pretend asset bubbles can be dealt with through the control of inflation deserves to be treated with contempt: the Twenties came to an end with the Wall Street crash and, for Japan, the Eighties came to an end with their Nikkei crash. Yet in neither case was there a whiff of inflation.As for governments, fiscal policy remains all-important, yet most countries have difficulty working out where fiscal policy is heading. In the eurozone, the Stability and Growth Pact has evolved so much it is losing all meaning. Elsewhere, deficits have got bigger, yet, with ageing populations, it is not obvious that governments should be borrowing: think of those unfunded future pension liabilities that are off balance sheet.And nations have to come to terms with globalisation as it is, in part, a windfall event. True, the World Trade Organisation and the Gatt rounds contributed to a removal of trade barriers. But the main factors driving globalisation have been exogenous: new technologies and the opening up of trade and capital flows with previouslyexcluded countries and regions.Yet the consequences of globalisation appear to be poorly understood and politically charged Current account imbalances are bigger Policymakers fret about them.