Rising global inflation seems to be one of the biggest humanitarian crises of today. Certainly, inflation has been the economic buzzword of 2021.
Economic data and the general economic outlook all seemingly point to bouts of inflation and even, in some nations, potential hyperinflation.
Basic household commodities are essential for human survival in every sense. Therefore, a sharp price surge is a threat to the well-being of world populations.
The UN Food and Agricultural Organisation (FAO) recently indicated that global food prices rose nearly 33% in September 2021 relative to the same period the year before. Further, per the body’s monthly Food Price Index (FPI), global prices have increased by more than 3% since July, reaching points not observed since 2011.
Last week, the Financial Post reported that Canadian propane prices have surged 300% and could escalate higher as US markets prop for ‘Armageddon.’ A few weeks ago, the US Energy Information Administration stated that there would be more expensive winter heating expenses, driven by an anticipated 54 percent inflation in propane heating, 43 percent higher heating oil costs, and 30 percent exorbitant natural gas heating prices.
Global Inflation Outlook
Inflation around the world looks like a certainty, with advanced economies no exception. The inflation rate in the US towered to a 13-year high of 5.4% in September 2021 from 5.3% in August and beyond market expectations of 5.3%. For the first time, at least since the 1970s, American shoppers are watching prices rise before their eyes. They are also experiencing food shortages at the supermarket. The global inflation setting across the world won’t only wreak havoc on developing countries—developing countries are feeling the inflation pangs, as well.
Meanwhile, the Organisation for Economic Cooperation and Development (OECD) points out that inflation is at three percent in the eurozone, a rise from virtually zero in the last month of 2020.
When it comes to G20 nations, the source of 80% of the world’s GDP, inflation is up 4.5 percent averagely within the same period. For instance, in Brazil, Russia, and Mexico, the rate is 10.25, 7.4, and 6 percent, respectively.
CNN reports suggest that China’s producer price index, which estimates the expense of goods traded to companies, sprang by a record 10.7 percent in September. Obviously, none of the indexes are reducing, hinting that a general rise in price level is likely to remain and probably rise in the coming months.
Pointing Fingers At The Pandemic
Governments and many experts blame the pandemic for the accelerated growth in prices and goods. The pandemic undoubtedly obstructed supply chains and the labor market, driving the sharp curtailments of goods.
In such circumstances, demand will exceed supply, which leads to the price of goods going up. But people are gradually going to work, as the world has opened up.
Furthermore, the plethora of government stimulus, lavish unemployment benefits, and bailouts instituted by governments during the pandemic accounts for the existing conditions.
The unnecessary, more emotional response than is justified to the pandemic by governments, which saw the printing of money to distribute to individuals and businesses, has brought us to this sticky point. There is more money in the hands of people chasing the few goods on the market.
Zero Interest Rate
Just as insidious is the trend towards zero or negative interest rate advanced economies like the US and European Union continue to pursue. Such an economic policy is outrightly unwise, since it discourages savings.
In September, the US Federal Reserve declared that it is maintaining interest rates at 0 to 0.25 percent. Their focus is to go this route until the economy fully recovers from the effects of the pandemic.
In the same vein, the European Central Bank (ECB) announced zero interest rates. It is like confusing the disease with the cure, contributing to the high inflationary ratio.
As the value of the monetary unit decreases at a faster rate than the quantity of money either is or can be increased, a disaster could befall the world: hyperinflation.
As economist Henry Hazlitt writes of inflation in his book Economics In One Lesson: “It discourages all prudence and thrift. It encourages squandering, gambling, reckless waste of all kinds.
It often makes it more profitable to speculate than to produce. It tears apart the whole fabric of stable economic relationships. It’s inexcusable injustices drive men toward desperate remedies. It plants the seeds of fascism and communism. It leads men to demand totalitarian controls. It ends invariably in bitter disillusion and collapse.”
Inflation is here. Tough times have set in on the world. Alternative assets, such as Bitcoin, are more important than ever.