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this post was submitted on 22 Aug 2023
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United States | News & Politics
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Reminder that inflation isn't a phenomenon that's beyond our understanding or ability to control. Inflation is the result of business owners choosing to raise prices in order to increase their rate of profit. That's all it is.
If the main cause is increased monetary supply, it's going to get far worse as the world de-dollarizes.
The USD enjoys an exorbitant privilege because its the world's premier reserve and trading currency. Under the old rules, if the Fed printed more money, other countries would buy it to settle their international trade and as a safe harbor for their wealth.
The extraordinary sanctions against Russia have caused countries to shift to other currencies to settle trade since they still want/need to buy oil, gas, and food from Russia. That means that there's going to be a lot more USD with no foreign escape valve.
I think it's telling that even during the worst period of US-Chinese relations in recent memory, the US sent Yellen over to Beijing to beg China to buy more dollar bonds.
There's a faction in Washington that knows the US economy is on the ropes but their appeals for cooperation are being drowned out by the other faction just chanting "WAR! WAR! WAR!"
I don’t think the US knows any other economic recovery options besides war.
We haven’t really changed it up since WW2.
I don't think WW3 would actually help the US economy. WW2 pulled the US out of the Depression because the manufacturing capacity was there but there wad a crisis of confidence and liquidity. The government pumping tons of money into military spending solved both of those problems.
Nowadays, the US doesn't have enough manufacturing. Even the weapons America supposedly builds are riddled with imported Chinese parts. Go to war with China or any major power and the US Government will flood weapons makers with money but that money has nowhere to go so it'll just drive up inflation even more.
I agree that WW3 won’t save the economy this time, I just think the US doesn’t have another answer.
Although I’m sure they’ll keep throwing money at consulting companies to research the issue and give them the same answer back.