(MENAFN- Asia Times)
The coming years are going to be a bumpy ride for more reasons than appear in press chatter, talk shows and podcasts and bumpier than the chatterers and“experts” imagine.
Global finances are at an epochal turn. The world has been living on capital (energy, water, land) and credit for many, many decades and that has stopped.
Economists blithely call it“The Great Moderation” and congratulate themselves. Highly skilled in their discipline, they are innocent of history and other kinds of insight essential to comprehending today's situation.
With their narrow understanding, American economists just told their leaders to max the national credit card, possible once President Nixon had in 1971 cut the dollar's link to gold, theretofore the sole restraint keeping American politicians and public modestly responsible.
The United States has since gone from Earth's greatest creditor nation to its greatest debtor in two generations, an unprecedented flip enabled by the public's changed mentality regarding“living on credit.” Before the late 1950s, if one wanted to buy something, one saved for it; there was no credit, only“layaway plans.”
Living on capital ... done! Bank of America's innovation of the universal credit card in 1958 normalized“living on credit” personally, and this mental revolution overturned the earlier norm in the United States that the state itself must balance its budget. This has fed through to the mentalities and financing policies of other nations.
In short, the world has been running down stores of capital/credit built up over two centuries (in America) and of energy/water/land built up everywhere over eons (fossil fuels, deep aquifers, great forests).
Not helped if (as in the US) public discourse is dominated by undisciplined people scornful of science and indifferent to education, focussed only on a life of endless sensory gratifications.
Living standards are going to decline worldwide as all are forced to live on what they can produce (or steal – think of Russia invading Ukraine), what some disparagingly call“austerity.”
The bitter political struggle now coming and going to worsen greatly most everywhere is over who shall suffer most.
Inflation is one of several policies by which the influential transfer purchasing power from the poor and powerless upward to those higher in the scale of political influence, including themselves.
As US Federal Reserve Chairman Jerome Powell stated at the 2022 Jackson Hole Federal Reserve Economic Symposium:“The burdens of high inflation fall heaviest on those who are least able to bear them.” He omitted to mention his intention that this happen.
By final exam time everyone paying attention in Economics 101 understood why inflation happens. Those choosing other careers forgot the details. Those who became professional economists didn't forget but are heavily motivated not to utter uncomfortable truths.
Hence the hand-wringing, the hysterics, the rampaging ignorance in the headlines and in talking head“expert” analyses.
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