As the world desperately tries to get out of the grips of the Covid Pandemic, there is something very insidious happening. Politicians increasingly believe they are economists, and economists are gradually embracing political views which affect the understanding of economics.
Prior to the pandemic, the world was in an economic growth era. Despite Trump’s use of trade barriers on China, the economy in the United States was roaring. The stock market was soaring to historic heights, while the greatest beneficiaries were Blacks and Hispanics who saw never heard of employment levels. The ability to exploit its oil and gas resources saw the U.S become a net exporter of oil, thus reducing the price of oil and gas on the world market. A new trade deal between the U.S. Canada and Mexico also helped the economy of the three countries. All these favorable economic factors were suddenly destroyed by the pandemic. Massive injection of cash into the economy was needed to finance health programs and the creation of vaccines. Furthermore, additional expenditures were used to support the millions of people who were forced to stop work and stay at home. In effect the whole economic model was turned upside down. Monetary and fiscal policies took a backseat and expenditures became the norm and money printing came to the fore as never before.
Then came the 2020 elections and a senile President Biden was elected. The hate for Trump saw Biden reverse Trump’s executive orders, and the United States entered a new era of policies based on ‘new economic’ concepts closely resembling communism rather than Liberalism, let alone Conservatism. Supported by a cabal of socialist Democrats in Congress, Biden proceeded to make some decisions which are today hurting the North American, and as result the world economy. Massive spending to pay workers to stay at home, the complete reduction of oil and gas exploration and therefore production in the U.S, coupled with other strange foreign policies turned the economy into an environment rarely seen before.
We are now in a full-blown recession, but which is being labelled as the greatest recovery of all times. The ‘Build Back Better’ policy of the Biden administration is being supported apparently by many Nobel Economic Prize winners, but when analyzed one must ask whether these economists are politicians or do, they still embrace their economic philosophies. These are some of the facts: We have millions (U.S 10m) of job openings yet we have millions unemployed (U.S 8.6m).These numbers are mirrored in other western countries. So, in effect we have more job openings than workers willing to work because they are being paid to stay at home. As a result, wages are rising because companies must do so to attract workers. With less oil being produced, Biden ask Saudi Arabia to produce more, still not enough, so the price of gas at the pump has risen. In addition, a supply chain problem has arisen, ships stuck at ports because there are no workers and truck drivers to transport goods. Now we have too much money chasing to few goods. Classical case for rampant inflation.
However socialist politicians and some economists claim that the inflation is ‘transitory’, so they continue to print money which reduces the value of the currency. While claiming that wages are increasing, they forget to acknowledge that a reduction in purchasing power of the dollar and rising prices due to inflation is in effect a reduction in real earnings.
What we see happening in the United States is also repeating itself, at different levels, in other Western countries. The latest COP26 climate change conference is going to make things worse, Taxes, increasing fees on carbon are going to further increase prices as much of what the world consumes is derived from oil. If this continues, inflation will not be ‘transitory’ as claimed by both politicians and economists. To bring some sanity to the problem we shall inevitably see a rise in interest rates, hopefully not to the levels of the Carter era. The current policies of the current crop of industrialized world leaders cannot be good for the economy. Printing money to subsidize socialist policies is a sure recipe for economic catastrophe. But what is worse is that too many economists are supporting these idiotic policies made by politicians who have no idea but one goal- getting re-elected, and so the world pays for their follies.