After the digital revolution, the old models no longer work the same way - the relationship between inflation and unemployment no longer exists

• Illustration // Photo: Getty Images

Perhaps after the next crisis, the world's central banks will seek legitimacy to change the old models. For example, the same "Phillips curve", which originally showed the opposite relationship between the (nominal) rise in wages and inflation, and was subsequently updated to the inverse relationship between inflation in general and unemployment rates. This study, like the other economic studies, finds legality in the past and tries to teach something about the future.

But the digital revolution is really a revolution and not just an expression, followed by the old models no longer working in the same way. It is no longer possible to show an inverse relationship between inflation and unemployment. It does not exist. There is no inflation and unemployment - not only in Israel, but also in the other developed countries in the world. Today it only works in closed markets, such as in Africa, South America and some of Asia. There, if more credit is released into the activity market, the more employees are hired and prices are rising.

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In the very sophisticated market that is created today it works differently. Price stability does not reflect a lack of demand, but a much larger supply and market. Today it is no problem to order food and toiletries digitally from overseas countries. Consumers have become more resilient in demand, and when a product they ask for is expensive - they buy a replacement because there are many. In a very sophisticated market there is also no problem of employment.

The opposite is true - there is a shortage of employees. In agriculture, industry and services, the Western world has exhausted its workforce and is looking for foreign workers and technological substitutes for human labor. It is quite possible that central bank conservatism is part of their survival mechanism. It is very possible that in the New World they will not be needed.