Global Economic Crisis

The U.S. Bureau Of Labor Statistics has released its April figures, and they have surprised analysts. They show a CPI rise of 0.8 %, , far higher than expected. In the past twelve months, inflation in the United Sates stood at 4.2%, and is clearly accelerating. As many observers note, even this worrying data understates many price increases more reflective of what is impacting the typical American consumer.

This blog has warned previously of the growing threat of inflation and eventually stagflation-high inflation in conjunction with a severe  recession . At present, inflationary pressure not only in the U.S. but globally are rising. In the case of America, there are a number of volatile factors accelerating inflationary pressure in the U.S. economy. The trillions of dollars in new public debt accumulated in only one year since the outbreak of Covid has overloaded the economy with monetary stimulus, creating a highly inflationary dynamic. The pandemic and public policy responses have

Sheldon Filger-blogger for GlobalEconomicCrisis.com

also added to the inflationary matrix. Then there are the unexpected but increasingly more common cyber attacks, a growing geopolitical reality.

The recent cyber attack on a critical oil pipeline in the U.S. has generated economic shockwaves, leading to gas shortages, long lines at gasoline stations and double-digit price rises. The response of the Biden administration: It is strictly a private sector decision on whether or not the company pays ransom to the hackers, and the government has no official position on the matter.

The example above does not leave grounds for optimism. The impotence of Washington D.D, is itself a contributing factor to inflation. Investors are already beginning to anticipate an eventual end to the near zero-interest policies of the Federal Reserve.

Pundits are already praising President Biden’s debt-fed economic boom through vast levels of public indebtedness, which add a few temporary percentage points to the U.S. GDP, while the Eurozone has slipped back into recession. Far more telling  are three interconnected economic trends, recognized by economists and sophisticated entrepreneurs, but largely ignored in the popular media. These trends are:

1. Global microchip shortage. The Covid pandemic both increased the demand for high technology cyberspace platforms , while disrupting supply chains on which the worldwide fabrication of computer chips depends. And not only cyber platforms; many manufacturing  processes and end-products, such as the automotive industry, depend on microchips. In the wake of the chip drought, factories across the globe have been forced to close down, adding to the unemployment rolls.

2.Explosive speculation in Bitcoin. Economic history knows many cases of speculative bubbles, such as the tulip bulb craze that occurred several hundred years ago. More recently, financially engineered sub-prime mortgage investment packages brought about the Global Financial Crisis of 2007-09. That most recent episode, however, pales in the speculative hysteria that has been a characteristic of cyber currency  in general, and in particular Bitcoin. The explosive  growth of this cyber “currency,” created out of thin air by an anonymous individual known only by a pseudonym, with archaic blockchain technology and cyber “mining” expending vast amounts of carbon-derived energy for an opaque, semi-mystical process,  confounds all reason. Trillions of dollars appear to be pouring into this speculative investments like sharks drawn by blood to a feeding frenzy.  Unless the global economy has been transformed into a metaphysical realm, this cannot end well. When the bubble pops, the collateral damage to the world’s economy and financial system will be beyond catastrophic.

Sheldon Filger-blogger for GlobalEconomicCrisis.com

 3, Increasing tensions both between countries, and within nation-states. This phenomenon afflicts most countries,  large and small, but particularly the U.S. and Russia. In the case of Putin’s Russia, Moscow’s relations with her  neighbors and the United States  are at their worst since the peak of the Cold War, while internally the regime’s suppression of dissent has only further distanced a growing proportion of the citizenry from the government. In particular, anecdotal evidence points to a major proportion of Russia’s youth, especially university students , having lost trust in the government and preferring to emigrate. These trends, however, are not unique to Russia.  What this portends to is the likelihood that countries will actually seek external conflict as a means to facilitate national unity domestically.

The above three trends all point to elevated risks of stagflation; high inflation and recessionary economics.  These in turn are likely to further exacerbate internal and external conflicts across the globe.