The actions of the authorities in developed countries, essentially action of the Keynesian economic policy discourse, have brought the economies into disrepute.
These types of actions consist of immense stimulus and virtually unfunded govt indexation of voter income in the face of expected impoverishment among COVID, lockdowns, and other worldwide problems.
The government is making money cheaper, in order to maintain electoral support.
This leads to a dispersal of demand and a proliferation of zombie companies, it distorts the bonuses for healthy competition, it reduces business efficiency, and it also kills the innovation element of economic growth.
Most importantly: it creates leverage – the prominence of needs over opportunities, demand over supply-in other words, it leads to dramatic market disequilibrium.
Before COVID times, such imbalances over the past 20 years were bought with new influence, and the imbalances went away for a while, giving birth to inevitable new unbalances in the future.
The Austrian cycles perfectly describe this process, its beginning points and its consequences. In fact , this leftist social agenda for buying electoral loyalty is a new political doctrine based on simplification, and most importantly, over the abolition of any issue for tomorrow.
In С OVID times, however , all that has changed. Another injection of mega liquidity, the cheapening pounds by all possible means – from direct budgetary donations to the inflating of the Fed’s balance sheet – occurred against a history of blocked demand, instead of falling due to economic wachstumsstillstand.
Because of this, the savings of all brokers increased abnormally, people halted wanting to work, the flow of investment into the stock market and into financial property increased, creating hyperinflation in them and moving them far from their fair value.
The assumption was that, once the restrictions were raised, the intensified and unmet buying intentions would dramatically accelerate the economy, because the capacity and potential of supply is enormous: provide has the capacity to satisfy demand, synergistically accelerating the economy.
This has not really happened, however , because there are already structural shifts as a result of excessive lockdowns: gaps in provide chains, reduced labor force involvement, and labor shortages in general, hypertrophied growth of commodity markets, and geopolitical stress that reinforce all of the over factors.
As a result, supply is unable to satisfy the demand because of cheap money, and inflation is again eating away at the economy.
At the same time, rather than reducing its clumsy treatment, the government, on the contrary, increases interpersonal programs and government spending in the form of infrastructure projects.
In this way it depresses business through the inevitable increase in the tax problem and further contributes to the data compresion of supply, reducing efficiency, the desire to invest and, generally, worsening business expectations plus expanding the mandate and the number of bureaucratic entities.
Against this same background, by continuing its conciliatory policy with resource autocracies, the government is forcing a green agenda at the most severe possible time, underfunding both conventional and alternative energy, which cannot cover the current need for the capacity provided by standard energy.
A cursory reading of Klaus Schwab’s The Great Reboot is enough to understand the inadequacy of such a utopian concept, the adherence to which, as we can easily see, leads to anti-utopian consequences.
The result was a geopolitical tension caused by differing passions, preferences and expectations associated with global players: Russia, being a resource autocracy, saw a window of opportunity and the vulnerability of the economic position of the Group West – and played the tactical card.
In the brief horizon, the calculation demonstrated correct: on the whole, post-conservative externalities and leftist populist insurance policies of Western power elites weakened developed economies, resulted in stagflation and increased the threat of recession.
The blow to the Western world in the form of the particular military conflict in Far eastern Europe and its aftermath was well-timed for the resource autocracy itself, which from within required a new impetus for self-preservation and confirmation of the regime’s legitimacy by the population.
What do we enter the end? We end up with structural shifts, when all the post-Soviet problems multiply manifold. Stagflation is already a fact today; recession is inevitable tomorrow.
Social displeasure, which will inevitably happen and it is already taking place in various areas of the Western world, will push governments to continue to worry about today without thinking about tomorrow – and to continue the policies of populism plus leftist expansive discourse, that will inevitably lead to even greater influence and exacerbate economic, and therefore social, imbalances.
Commodity inflation will not end quickly, since significant exporters of raw materials are in conflict and alternative channels of resource importation have not already been established.
New energy is obviously insufficient against the background associated with limiting imports of outdated energy from the resource autocracy. This means that traditional energy supplies must be recanalized, which is inevitably accompanied by rising costs and acceleration of inflation.
Supply is certainly under stress from rising expenses – logistical lockups, item inflation and labor shortages. An additional stress is along the way, or rather, already within the room – rising credit score costs and a potential drop in demand.
Simultaneously, China, as the embodiment of the alternative sociopolitical pole, advantages in the short horizon.
Against the history of universal turbulence and socio-economic disequilibria in the Western world, the ability to centrally stimulate the market within the initial stages of the capitalist impulse can be quite a success story.
At this point, there are still no acute dependencies on state injections, no meaningful imbalances in supply and demand dynamics, with no ideological constraints on imported raw materials.
Cina, with its own problems of growing state capitalism by means of hypertrophied infrastructure capex plus an authoritarian political body leading to market and innovation inefficiencies over the long haul, now has a distinct advantage.
It is based on the possibility of directive economic management and linear monetary plus fiscal incentives.
This is an advantage that will Western states no longer have and that, by the way, China alone will soon lose, mainly because games of “ large government” do not succeed for too long.
They always end in one thing: social and economic failure in its various forms plus outcomes.
Consequently, Western economies are faced with a dilemma as no time before: to continue state expansion plus addiction treatment with a new dose, or to start bringing the economy into balance.
Of course , this is connected with tough and unpopular political decisions, all the more painful in a situation of global tension.
But this really is precisely the situation in which political figures show their true skills, namely the ability to convince voters to sacrifice something these days for the sake of a better tomorrow.
Otherwise, you will see no tomorrow at all.
So far, we have been guaranteed of only one thing: we are living in one day and there is absolutely no tomorrow.
In short, it’s like Keynes: we are all going to die over time. I think we’ve been through this before.