The First ‘Global Inflationary Depression’ Is Very Possible
The comments below are an edited and abridged synopsis of an article by Bruce Wilds
We may soon see the first global inflationary depression. We tend to roll through mild recessions; however, what’s coming may be far more severe. In the past, times of falling economic activity have generally been deflationary as defaults rise but this time, not so much. Also, many events tended to be regional rather than global but, as economies have become more interconnected, it increases the possibility of problems spreading across the world.
Currently, the biggest source of demand comes from governments, and not from working people earning a living or businesses growing. If you removed all the money being spent on Covid-19 vaccinations, tests, and a slew of inefficient spending that has created little long-term benefits to the economy, GDP would fall like a stone. The money flowing from central banks and governments has created the so-called pent-up demand we have been hearing about and predictions of 5% or more GDP growth next year. In truth, capacity utilization is down even while trillions of new dollars pour into the system. This is the logic behind saying that a depression may be in the wings.
Up for discussion: China’s economy shows signs of slowing; and inflation hits in an uneven manner.