Need isn’t the problem, supply is the issue, and it can’t be resolved by printing more currency or reducing rates of interest or cranking up inflation.
To the degree that we live in a financial order controlled by Keynes and “demand,” then any conversation of inflation needs to circle round to Keynes and his magic option to all economic ills: “demand”, otherwise known as cash burning a hole in your pocket.
Keynes’ option to depression, unemployment and essentially every other financial ill was to stimulate demand for products and services by offering individuals more cash and making it simpler for them to obtain more cash, with the essential incentives being to promote more spending, not more cost savings and financial investment. The more individuals were encouraged to obtain and invest, the more demand for products and services would increase and this development would resolve all financial ills.
Performance and supply aren’t problems in the wonderful world of Keynesian economics: Keynes notoriously suggested that paying individuals to dig holes and after that fill them was one way to get more money into pockets for individuals to invest.
In this economic order, inflation is a beneficial incentive to push individuals into spending their cash rather than saving and investing it, as all cash will buy less next year in an inflationary regime.
Here’s the problem with the Keynesian economic order: it stopped the gold watch in 1932 when the world’s supply of oil and other resources might still be deemed semi-infinite: supply was just waiting on more demand as a signal to increase. If need increased, supply would always amazingly increase in parallel.
In this wonderful kingdom of Keynes, any deficiency/ lack would be transitory for two factors: 1) stuff was essentially infinite; there was constantly some brand-new source to mine, drill, extract, and so on, and 2) there is constantly a substitute for whatever is momentarily scarce: if the beef supply can’t be ramped up to fulfill need, then people can purchase a substitute, which is presumed to be in unlimited supply.
In 1932, the world was still awash in oil, and hydrocarbons and minerals seemed abundant beyond measure. The human population was growing however no place near using the planet’s agricultural and fresh water supplies. Whatever was essentially infinite; shortages were transitory or localized.
Set the gold look for 2021 and none of these conditions apply. The human populace has actually approximately quadrupled from 2 billion to 8 billion, the energy taken in per capita in industrialized nations has skyrocketed, resources are limited by depletion and expenses of extraction, and as an outcome, shortages are not temporal, they’re long-term.
Inflation isn’t simply a mechanism to incentivize borrowing and spending now rather than later on, it’s a policy of impoverishment of the bottom 90%. The wealthy have earnings and capital gains from possessions which bubble greater in the wonderful kingdom of Keynes, while those who depend on earnings for their living lose ground every 2nd the watch ticks forward in time.
Keynesian magic can’t conjure substitutes for fresh water, wild fisheries, cobalt and even semiconductor-grade sand. On the planet of 2021, demand is not the issue; supply is the concern, and the Keynesian magicians are actually blind to the effects of this modification.
The problem isn’t there isn’t adequate money burning a hole in consumers’ pockets; the problem is the cost of items drawn out from the physical world and shipped throughout the world is rising far much faster than the Keynesians can pack cash into pockets. The other problem is that there are no replacement for what is scarce, and unless the Keynesian magicians can magically turn dirt into cobalt, make heat and pollution vanish and supply magic carpets for moving things around frictionlessly, then the economy will progressively be dominated by scarcities and lacks of resources and other inputs for which there are no replacements.
It’s a different world, individuals, so move your gold watches from 1932 to 2021, or suffer the repercussions of delusional faith in phony magic. Demand isn’t the problem, supply is the issue, and it can’t be fixed by printing more currency or decreasing rate of interest or cranking up inflation.
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