In a recent Harvard Business Review (HBR) article, "What Causes Inflation," Walter Frick describes some of the economic forces that often create sustained inflation.
It can happen when a critical supply becomes suddenly scarce, such as the Arab oil embargo of 1973. Prices advanced, limits were placed on the amount of gas you could purchase, and lines of cars formed around all gas stations. We were beset with inflation exceeding 18% at times, and it took a decade for inflation to subside.
It can happen when economic expectations do not meet reality or when economic shock occurs. The 2007—2010 Great Recession is a prime example. The trading of mortgage-backed securities (MBS) became extremely popular on Wall Street during the late 1990s and early 2000s. These securities were originally rated AAA by the bond rating agencies, and their popularity increased. Gradually, however, to earn higher yields, a portion of the MBS packages would contain a few subprime home loans. This practice grew until soon Wall Street had grievous amounts of MBS, not rated, on their books and with clients. A small and intelligent group of individuals spotted this financial weakness and "shorted" the MBS market. This immediately created the largest financial crisis ever on Wall Street. Because the investment banks were "too big to fail," it took monumental giveaways from Uncle Sam — some say $12 trillion over a decade — to put the banking system back on its feet.
It can happen when a sudden increase in the supply of money occurs. Did anyone give thought to what might happen when Uncle Sam printed and dumped $6 trillion into the economy during COVID? With a $15-trillion money stock before printing COVID checks, this $6 trillion represented a 40% increase in the total money supply. It peaked at $21.7 trillion during July 2022, the highest ever, before beginning a slight decline to $20.9 trillion at the end of this past December.