But reality must now remind everyone of a lesson from Economics 101: when supply is restricted, price (and profits) go up, not down. For example, on March 21, just as Russia’s attack on Ukraine was driving gas prices sharply higher, the US Securities and Exchange Commission decided to announce expansive new climate-related disclosure rules designed to discourage fossil-fuel investment.įor years, climate regulators have repeated the mantra that fossil-fuel companies would soon be bankrupt – stuck holding “stranded assets” – because of such regulation, and that this justified measures to force banks to stop lending to them. Efforts to strangle domestic fossil-fuel companies via financial regulation continue unabated. Similarly, although cracks have appeared, the Germans still can’t bring themselves to allow nuclear power or fracking for natural gas. After blocking the Keystone XL Pipeline and limiting oil and gas exploration, US President Joe Biden’s administration has now gone begging to Venezuela and Iran to make up for a shortfall in energy supply. The folly of this approach is now plain to see. Our governments have been pursuing a dangerously myopic strategy of shutting down US and European fossil-fuel development before alternatives are available at scale, strangling nuclear energy, and subsidizing grossly inefficient (and often carbon-intensive) projects such as California’s high-speed train to nowhere. The return of inflation and Russia’s war in Ukraine signal the end of stupendously counterproductive energy and climate policies. Tariffs, industrial protections, labor-market distortions, restrictions on skilled immigration, and other supply-constraining policies have direct costs that cannot be offset by printing more money. If we want growth – to reduce poverty to pay for health, environmental protections, and transfers or for its own sake – it will have to come from unleashing supply. We now know that it was supply, and that more stimulus will bring only more inflation. Was this sclerosis a case of demand-side “secular stagnation” that, given persistently low interest rates, had to be addressed with oodles of “fiscal stimulus?” Or did it follow from a reduction in supply owing to the corrosive effects of protected and over-regulated industries, or to deeper problems such as the erosion of educational performance or a lack of innovation? After rising by an average of 3.6% per year between 19, US real (inflation-adjusted) GDP growth has since averaged just 1.8% per year. Since 2000, long-term growth has fallen by half, representing one of the great unsung economic tragedies of the twenty-first century. The “secular stagnation” debate is settled. Today’s small (so far) inflation is a taste of this fundamental change. When people no longer have confidence that the borrowed money will be repaid, or that the printed money will be soaked up again, they will not lend more.
But once fiscal space has run out and given way to inflation, the government’s ability to stop the next crisis may evaporate. Given these precedents, our financial system now firmly trusts that the government will borrow or print money in the event of any future crisis. Once again, government money went to bail out creditors, prop up asset prices, and provide more stimulus. The COVID-19 recession was met with a tidal wave.
#FALLOUT 4 UPDATE 1.8 RELEASE TORRENT#
The 2008 financial crisis was met with a torrent of borrowed and printed money to stimulate the economy and bail out banks and their creditors. These facts will make it much more difficult for policymakers to continue ignoring budgets and the disincentives that are embedded in many social programs. These policies will lead to even more inflation.Įxpanded social programs and transfers must be funded from stable long-run tax revenues, from taxes that do not impose undue costs on the economy. Unfortunately, many governments are responding to inflation by borrowing or printing even more money to subsidize energy, housing, childcare, and other costs, or to hand out more money to cushion the blow from inflation for example, by forgiving student loans.
Spending to “create jobs” is nonsense when there is a widespread labor shortage. Stimulus spending for its own sake is over.
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