2021 to 2024: From “Vengeance” Spending Lavishly to Forced Thriftiness

After all, “they can constantly print more money.” That’s always the service up until it ends up being the problem.

What we call economics is best comprehended as:

1. A mechanism that distributes resources asymmetrically: some advantage more than others.

2. The running of the herd: human beings are a social-herd species.

3. Everybody looks for a windfall: something for nothing, or getting more while doing less.

4. Everybody looks for to make windfalls irreversible by rigging the mechanism to favor their interests.

5. The system is a system of self-reinforcing feedback loops that generate diminishing returns, blowback and unintentional repercussions.

This viewpoint helps us understand the progression of the economy from 2021 to 2024. In a nutshell:

2021: massive stimulus, “meme stock” bubble

2022: “Vengeance” splurging, inflation

2023: AI stock bubble, “soft landing”

2024: Forced Thriftiness

So enormous stimulus at first sets off the locked-down herd into meme stocks, inflating a bubble. When the lockdowns end, this huge stimulus releases “revenge spending” where rate no longer matters, we require a trip, a new wardrobe, etc, never mind the cost.

Unsurprisingly, this tsunami of price-insensitive spending while the distribution system was still having a hard time to reconnect disrupted international supply chains causes 1) rampant cost gouging/ profiteering and 2) rampant inflation as expenses are missed the food cycle.

Lots of costs are “sticky” and rarely decrease: taxes, charges, salaries and advantages, health care, lease, insurance, childcare, etc typically only ratchet higher. Any cog lower is rare and modest, and ultimately reversed.

The net result is self-reinforcing inflation, as stimulus never ever really stops: windfalls are rigged to be irreversible, even as broad-based stimulus dries up.

2 things occur when windfalls are rigged to be permanent: 1) the distribution of resources (“money,” entitlements, tax breaks, subsidies, goodies of all kinds) ends up being progressively uneven (the already-rich get much richer at the expenditure of those hardly holding their ground) and 2) the source of the supposedly long-term windfall generates self-reinforcing feedback loops that cause diminishing returns, blowback and unexpected repercussions.

Simply put, the uneven distribution either self-corrects or enters go to failure feedback. Either way, the sources of the windfall cease working, and the result is required frugality. Windfalls that were presumed to be long-term are revealed as short-lived asymmetries whose own characteristics produce decay, decreasing returns, blowback and run-to-failure.

And constantly, obviously, the life of ease ending is “impossible” since recency predisposition motivates us to think the circulation system has god-like powers and permanence. Bur thriftiness winds up being forced one method or another, even if the stimulus appears to increase. Bubbles deflate and windfalls diminish and then reverse into doing more to get less.

After all, “they can always print more cash.” That’s constantly the option till it ends up being the issue.

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