Gold standard, inflation or why modern banking system is a kijiji scam

[irontaino]

Crypto currency really is a way out. Yes, i know how volatile and freaky it is. The principle is not easy to understand, but it's worthwhile to inform oneself about it. To their utter fault, economists tend to ignore it and to discard it without having had an actual look, and without having tried to understand it. I know very well about the volatility because i have half of money in it. At the start i was regularly scared and bewildered by the volatility, but one can get used to it and it works in principle. It is nothing less than a POTENTIAL technological revolution that can change the world for the better, if enough people support it. I would like to encourage everyone to invest, but it's possible that this brilliant new method of value storage is going to be suffocated by various governments and central banks, who needlessly feel threatened by it.

If there are enough people who believe in this type of currency and learn to value what it can do, it will grow and stabilize. The more people understand it, the more people invest in it, the less volatile and the more reliable it is going to be.

The extreme volatility is actually a good sign. It is so cruel and shaky, because it is the actually only fair market in existence, so there are highly leveraged speculations going on and constant pump and dump schemes run by the rich. Of course there have to be regulations that are actually meant to protect all (especially small) investors. But the current outlook is a display of utter hypocrisy, bank guided lobbyism and corruption, centering around the US Securities and Exchange Commission, which is actually trying to suppress this healthy transformation of the financial market. They are actively suppressing innovation and progress for the benefit of large investment banks and to the detriment of everyone else. Nothing less disturbing is going on, i'm sorry to say.

It is a potential way out and it is about to be taken away from us all. Kudos to anyone who has the courage to appreciate this by investing, even if only on a small scale. Yes i am convinced that this is the way to go in the long run. You may laugh and ridicule now, i truly don't care (pm me for questions, if you want).

It's a HUGE opportunity and my suggestion is to not miss it. But be careful, especially with speculating. It's a wild ride for sure.

Long term, I could see crypto as a viable alternative. Obviously, it has some growing pains to go through, and it's terrible for the environment. Currently, it's something Elon Musk can crash with a tweet, and we need a more environmentally friendly way to mine it.

[dogukan]

About the crypto-debate: I'd much rather leave the management of global monetary issues to institutions with lots of know-how, information and educated workforce in it.
Average human is clueless about the affairs of the world, goes left and right with each conspiracy, jumps to conclusions based on prejudices, participates in a ton of groupthink.

We have had a world BEFORE this much financial system coherence throughout the world. It was a world full of extreme bubbles, volatility, no global trade close to this scale.

Do I have problems with the financial system? Yes
Do I think there is a lot of transparency problems and political power capture? Yes
Do I think financialization of the economy is going too far? Yes
Do I work in a financial field at an institution that manages billions of USD? Yes

Am I against the cryptos? Not at all. I would very much like there to be innovation, financial literacy increase. And most importantly, I would love to see what the decentralized side of the cryptos can bring to the table. I am even more interested in the things blockchain technology can achieve. But let's be honest, most who invest are clueless folk, many think they are taking on the global financial system or something.

The idea that financial institutions are AGAINST cryptos is not true either. To be frank, no one knows what path the cryptos will go towards. As part of my job, I go through various reports of big investment banks on a variety of issues. I often come across specialized sections on crypto in most bank reports. They already have dedicated teams and they are looking into what cryptos can bring to the financial system.
Most clueless folk think there is a "secret elite" that run the financial system and do not want to lose power. The truth is, tens o thousands of people work in these institutions that have high financial literacy, and trust me, they are a lot more interested in what is going on than the "HODL" crazed masses.

That being said, the USD and to an extend EUR dominance of the global financial system is not something that is necessary for the banks. Banks can profit a ton from any currency as long as they manage margins in their respective country's contexts. The USD and EUR dominance is about the dominance of global liberal order, the power of American and EU institutions to shape the world, reward those who liberalize and beat those who go like N.Korea, Iran or Russia.

It is about GEOPOLITICS of USA and on the grander scheme, liberalism.
Say if BTC was to become the dominant currency, would the global order collapse? We don't know. USD certain is one of he backbones of the system. We do not know how the world would shape without a USD reserve currency. And it can go many ways. But I am not here to discuss that.
I simply know that I'd much rather have my money managed by institutions with a lot of educated people in it who cooperate at a global level to ensure the system works....rather than the meme-stars of the crypto world who think they'll get rich by throwing their money at whatever is being hyped.

As for the Gold Standard....bruv, I do not often take HH seriously as I believe he's gone too far into the right*wing conspiracy craze but he sure needs a lot more reading to do. Gold Standard had its time in the 19th century. There is a reason the world ended in the WWII and Gold Standard played a major role in that.

Another issue is that Gold Standard requires ALL WHO TAKE PART IN IT cooperate. How will you ensure that? What if Turkey's Erdodan doesn't want Gold? What if China with it's tons of USD reserve have no interest in a commodity that it cannot manage the supply of? Do you even know why the gold standard was abandoned?
What if the gold supply cannot keep up with global economic growth?
Global trade today is faaaar more deep and complex, involves a lot more long-term planning. The economy moves far faster than the gold supply. You think the amount of gold dug can keep up with the efficient pricing needs of the world economy in the 21st century?
Various economies all over the world are extremely diverse and yet integrated...do tell me how you think the world will do with a fixed-exchanged rate?
This is exactly what I mean by financial illiteracy. People who identify with right wing look for some political identity, find out about libertarianism, see what libertarians promoted in the past...AH, GOLD STANDARD. OF COURSE! NOW I HAVE A POLITICALLY SUPPORTIVE OPINION ON FINANCE. LET THERE BE GOLD STANDARD!

Instead of debating the gold, a more realistic scenario will be the cryptos. And like I said, no one quite knows which way it will go as of right now. Though the current debates will certainly shape where it goes.

[Heathen Hammer]

Putting your trust in authority and establishment is a great way to end up with too-big-to-fail banks that are subsidized from your taxes and get bailed out when they fail anyways.
As I pointed out in the first post, fiat currency's only value is public confidence. There is nothing that backs it up, beyond the belief that you can exchange it for goods and services. So if for any reason public doubts it, it is over. Just look up how quickly people abandoned currencies in such situation.
I couldn't help but chuckle at the whole "fiat system must be preserved, because without it we won't be able to have forever wars and color revolutions" take. I'm scared to think what the people who are obsessed with hating Russia and Iran think their monetary systems are, lol..
Not to mention that even if we assume that "global liberal order" with its elite paedo rings, corruption, forever wars and devastating effect on nature is a good thing, its fate is sealed by how volatile its monetary system is.
You can't build a house without a strong foundation and monetary system is just that.
Also in response to accusation of me not "reading enough", someone should probably look up when did FDR elect to abandon Gold Standard. Pro-tip: it was before WW2. Federal Reserve was established even earlier.
So much for me not reading enough, eh?
Also I never really said that Golden Standard > crypto. Talk about reading comprehension again...

[dogukan]

Putting your trust in authority and establishment is a great way to end up with too-big-to-fail banks that are subsidized from your taxes and get bailed out when they fail anyways.

The global economic growth of the post 1945 under the liberal order with centralized cooperating institutions like WB and IMF and other regulatory supranational mechanisms says otherwise. Do tell me, how would a world without these institutions would exactly have been please? Say if the America of the post 1945 world simply isolated itself, didn't create financing mechanisms for European growth etc...what would have happened?

As I pointed out in the first post, fiat currency's only value is public confidence. There is nothing that backs it up, beyond the belief that you can exchange it for goods and services. So if for any reason public doubts it, it is over. Just look up how quickly people abandoned currencies in such situation.

Fiat currency's only value is public confidence? You call a government, it's central bank, it's treasury, sovereign bonds, banking system and export-import related actors just "public confidence" ?

I couldn't help but chuckle at the whole "fiat system must be preserved, because without it we won't be able to have forever wars and color revolutions" take. I'm scared to think what the people who are obsessed with hating Russia and Iran think their monetary systems are, lol..

I'll tell you what. Good luck putting Iran, Russia and China on Gold Standard.

Not to mention that even if we assume that "global liberal order" with its elite paedo rings, corruption, forever wars and devastating effect on nature is a good thing, its fate is sealed by how volatile its monetary system is.

If you study financial history, you'll see that the FIAT currency is the MOST elastic financial model humanity has so far came up with. Other pegged and fixed models (Gold Standard comes with a fixed-rate in it's 19th century form and peg in it's Bretton Woods form)

You can't build a house without a strong foundation and monetary system is just that.

Exactly.

Also in response to accusation of me not "reading enough", someone should probably look up when did FDR elect to abandon Gold Standard. Pro-tip: it was before WW2. Federal Reserve was established even earlier.
So much for me not reading enough, eh?

You seriously think WW2 began overnight in 1939 and Gold Standard in the prior couple decades had nothing to do with the impossible to manage inflation and unemployment because it prevented the ability of government's to adjust their exchange rates?

[Heathen Hammer]

The global economic growth of the post 1945 under the liberal order with centralized cooperating institutions like WB and IMF and other regulatory supranational mechanisms says otherwise. Do tell me, how would a world without these institutions would exactly have been please? Say if the America of the post 1945 world simply isolated itself, didn't create financing mechanisms for European growth etc...what would have happened?

Then ongoing decline in purchasing power and hyperinflation say otherwise. Billionaires are doing great, indeed, but average Joe has little to gain from the status quo. Hence why reform is necessary, unless we want to repeat Weimar lessons.

Fiat currency's only value is public confidence? You call a government, it's central bank, it's treasury, sovereign bonds, banking system and export-import related actors just "public confidence" ?

Yes.

I'll tell you what. Good luck putting Iran, Russia and China on Gold Standard.

Gold Standard? Not sure. Monetary reform to move away from fiat? Yes.
People that support fiat system don't seem to realize that we no longer live in early 1900s....

If you study financial history, you'll see that the FIAT currency is the MOST elastic financial model humanity has so far came up with. Other pegged and fixed models (Gold Standard comes with a fixed-rate in it's 19th century form and peg in it's Bretton Woods form)

I guess all the fiscal calamities of the past century never happened then. Hyperinflation must be made up by those pesky extremists.

You seriously think WW2 began overnight in 1939 and Gold Standard in the prior couple decades had nothing to do with the impossible to manage inflation and unemployment because it prevented the ability of government's to adjust their exchange rates?

Err, WW2 has dozens of factors behind it, from geopolitics to economy, trying to reduce it all to monetary system is silly, having said that if Weimar citizens didn't need wheelbarrows of cash to buy bread, NSDAP and its SPD colleagues would have tougher electoral challenge. But sure, if you want to tank the economy and pave way to Hitler/Stalin 2.0, be my guest and embrace fiat currency lol.

[swabian]

About the crypto-debate: I'd much rather leave the management of global monetary issues to institutions with lots of know-how, information and educated workforce in it.
Average human is clueless about the affairs of the world, goes left and right with each conspiracy, jumps to conclusions based on prejudices, participates in a ton of groupthink.

We have had a world BEFORE this much financial system coherence throughout the world. It was a world full of extreme bubbles, volatility, no global trade close to this scale.

Do I have problems with the financial system? Yes
Do I think there is a lot of transparency problems and political power capture? Yes
Do I think financialization of the economy is going too far? Yes
Do I work in a financial field at an institution that manages billions of USD? Yes

Am I against the cryptos? Not at all. I would very much like there to be innovation, financial literacy increase. And most importantly, I would love to see what the decentralized side of the cryptos can bring to the table. I am even more interested in the things blockchain technology can achieve. But let's be honest, most who invest are clueless folk, many think they are taking on the global financial system or something.

The idea that financial institutions are AGAINST cryptos is not true either. To be frank, no one knows what path the cryptos will go towards. As part of my job, I go through various reports of big investment banks on a variety of issues. I often come across specialized sections on crypto in most bank reports. They already have dedicated teams and they are looking into what cryptos can bring to the financial system.
Most clueless folk think there is a "secret elite" that run the financial system and do not want to lose power. The truth is, tens o thousands of people work in these institutions that have high financial literacy, and trust me, they are a lot more interested in what is going on than the "HODL" crazed masses.

That being said, the USD and to an extend EUR dominance of the global financial system is not something that is necessary for the banks. Banks can profit a ton from any currency as long as they manage margins in their respective country's contexts. The USD and EUR dominance is about the dominance of global liberal order, the power of American and EU institutions to shape the world, reward those who liberalize and beat those who go like N.Korea, Iran or Russia.

It is about GEOPOLITICS of USA and on the grander scheme, liberalism.
Say if BTC was to become the dominant currency, would the global order collapse? We don't know. USD certain is one of he backbones of the system. We do not know how the world would shape without a USD reserve currency. And it can go many ways. But I am not here to discuss that.
I simply know that I'd much rather have my money managed by institutions with a lot of educated people in it who cooperate at a global level to ensure the system works....rather than the meme-stars of the crypto world who think they'll get rich by throwing their money at whatever is being hyped.

As for the Gold Standard....bruv, I do not often take HH seriously as I believe he's gone too far into the right*wing conspiracy craze but he sure needs a lot more reading to do. Gold Standard had its time in the 19th century. There is a reason the world ended in the WWII and Gold Standard played a major role in that.

Another issue is that Gold Standard requires ALL WHO TAKE PART IN IT cooperate. How will you ensure that? What if Turkey's Erdodan doesn't want Gold? What if China with it's tons of USD reserve have no interest in a commodity that it cannot manage the supply of? Do you even know why the gold standard was abandoned?
What if the gold supply cannot keep up with global economic growth?
Global trade today is faaaar more deep and complex, involves a lot more long-term planning. The economy moves far faster than the gold supply. You think the amount of gold dug can keep up with the efficient pricing needs of the world economy in the 21st century?
Various economies all over the world are extremely diverse and yet integrated...do tell me how you think the world will do with a fixed-exchanged rate?
This is exactly what I mean by financial illiteracy. People who identify with right wing look for some political identity, find out about libertarianism, see what libertarians promoted in the past...AH, GOLD STANDARD. OF COURSE! NOW I HAVE A POLITICALLY SUPPORTIVE OPINION ON FINANCE. LET THERE BE GOLD STANDARD!

Instead of debating the gold, a more realistic scenario will be the cryptos. And like I said, no one quite knows which way it will go as of right now. Though the current debates will certainly shape where it goes.

I don't think anyone said crypto has to replace the banks and flip off the banksters. You may have a job at a bank in some country, but you obviously missed out a lot of what has been going on with the SEC and the US senate. Crypto is being frowned upon by many who do not understand it and never bothered to learn more about it. Not by everyone, there are a few who defend it, but most US senators are simply utterly clueless. Meanwhile the SEC is attempting an obscenely obvious power grab with the goal of full control over the crypto market. They are already halting progress and innovation with their unsanctioned actions by picking winners and losers (two former SEC members are now of course highly invested in Ethereum and Bitcoin after having granted them a free pass), more or less arbitrarily declaring what is a security and what is a currency by applying the Howey test - a judicial guideline from the 1930s that is utterly unfit to be applied to the cryptomarket. They are deliberately holding back with providing regulatory clarity (partially even admitting to it), thus keeping away larger institutions.

Read about what has been going on with the lawsuit against Ripple, which is one hell of a mess and read about how innovators like Charles Hoskinson are utterly frustrated with US regulators (it's really the SEC what we're talking about) holding up progress and forcing the industry out of the country. Lately Hillary Clinton brought up crypto in an interview, describing it as a destabilizing force that is better done away with. There are a lot of political forces that are clearly working against crypto, of course not necessarily financial institutions (although many downright despise it and look down on it, making money off of it regardless). To say that "the institutions" don't have a problem with crypto at all really betrays that you don't have much of a clue of what's been going on in the past couple of years.

You see everything from the perspective of your working place, I suppose. Of course there are companies and banks that dabble in crypto. Recently the German Volksbank made an outright spectacular move by offering a lot of cryptos (not only BTC and ETH i think) to their customers. The Zuercher Kantonalbank for example has done the same. Yeah there is a lot going on for crypto, but that shouldn't cloud your perspective when it comes to what is going on in the United States, which - for better or worse - is the world's biggest commodities market by far. So what is going on over there does indeed matter and so far it's not looking so good at all.

What I'm also missing in your post is any hint of a clue about what crypto currency can do as a means to fight inflation and the difficulties of the central banks to secure the monetary system. Instead you're ranting on from a high horse about how 'the crypto plebs' mean to replace the traditional finance system. Nobody said anything like that, you're burning down a strawman. Yawn. Decentralisation doesn't mean that financial professionalism is obsolete. Nobody I'm aware of said anything like that.

Fiat currency's only value is public confidence? You call a government, it's central bank, it's treasury, sovereign bonds, banking system and export-import related actors just "public confidence" ?

You're missing the bigger picture. There is nothing wrong with HH's statement, he's basically right here: FIAT money is simply a consensus on a currency by public confidence. Financial institutions are built on top of that, thy could not exist without preceding public confidence.

You don't seem to be aware of the revolutionary potential cryptocurrency really has in that regard. It provides the possibility of trustless transactions (so independence from third parties in a transaction) thus solving a lot of the problems FIAT finance has with this aspect alone. It has a clear answer to inflation as well.

Crypto has the potential to completely revolutionize the entire financial system. To transform it, not to abolish it. It won't wipe out your job, you'd just have to learn a couple of new things. Some embrace it, many are unaware or skeptical and yes, some in power are really aversive and even hostile towards that kind of change. There's no doubt about that. Do your research.

[dogukan]

* My post was mostly about the reductionist critique of the traditional financial system by these neo-right circles. I never said the financial system is perfect.

* Most of my savings are in various cryptos. I am from Turkey. Just check the inflation and USDTRY, USDEUR rates to see why I had to do this. I actually follow crypto news daily. As of now, I hold BTC, ETH, SOL, ADA, XRP, DOT, LINK and a couple others. So while I am no pro on blockhain technologies and all the daily news about how the "new versions" will change everything forever, I do put my money in these for the moment.

That being said, the reality is that none of these projects have turned into anything really useful....yet.

*Yes, there are political force against crypto. These forces are often beyond banks. Cryptos are a potential threat to USD hegemony, and collapse of USD hegemony is a threat to American geopolitical dominance. That is the reason a scare exists. I am not disputing that. My post was directed toward HH's conspiracy about "global elite banks illumunatiiing the hell out of everything" and his simplistic defense of the gold standard based on that. A century old tale. Assumptions about international bankers being some evil secret organization trying to create a global communist government or something...
-So yeah, there is resistance towards cryptos. And I repeat, we do NOT know whether cryptos would threaten Western dominance over global finance or not. Because they still do not exactly have a solid utility. So all we have is imaginations about what could happen. And obviously regulations as well as technology's path will decide what impact it will make.
So far, cryptos are being used by governments that are somewhat excommunicated from the global order to bring in the USD needed into their countries. But since most of these governments like Russia, China etc are even more authoritarian, they are a lot more against a financial intermediary mechanism that they cannot control.
Western world is relatively more engaged with the concept of cryptos naturally.
-The pressure from SEC is more about regulations. And I do not think regulations are bad. Crypto world is full of scams and people losing their live's savings. Regulations would mean further integration of cryptos to global finance which would open it's path. It would also mean institutions would engage with concepts more deeply and hence undertanding them, perhaps aiding their development.

* The idea that "money is just an idea people believe in" is being taken to far in the crypto circles. Of course money is a convention, of course it works because it is accepted by masses. Nobody denies that. But in the modern world, FIAT currencies like USD and EUR are beyond simple national conventions. They do not simply rest on public's confidence, they rest on extremely deep industries all over the world that only speak through USD or EUR. These currencies are a lot more entrenched than the concept of money/value we talk about in finance 101.
These are not simply the money in circulation in some medieval statelet people have decided to turn into a convention. USD today rests on not only the most powerful states and financial institutions in the world, it also is the reserve of the supranational institutions. So it is quite a bit more than just "public confidence". Could it collapse? Of course.

[Heathen Hammer]

The more excuses I hear for federal reserve and fiat monetary system, the less I'm sure that its apologists actually understand how it works.
The value of currency is your ability to exchange it. No matter how hard you harrumph to this notion, its public perception is the value. Hence why throughout history, until relatively recent time, it has always been backed either directly by metal or by other assets. The concept of fiat currency is not proven to be the best - it is simply something bankers wanted for their own benefit some century ago and benefit they did and still do. Hence the current system, where American wagies subsidize American banks, and then foot the bill for bailouts when those banks fail anyways. Very fair, liberal and democratic, All Heil the global liberal order!
So yeah, if we look at this strictly pragmatically USD and EU are nothing more then just paper - paper that enough of the public believes can be exchanged for goods or services. Now the problem with the mess that is current fiscal system in US and West in general is that its financial institutions can create currency out of thin air, thus driving its value down. Hence hyperinflation, via which majority of population is "taxed" out of value of its own earnings. Which, IMO, is the real reason why this system is in dire need of a reform, as majority of people subjected to it do not benefit from it, yet are forced to support it.

[dogukan]

The value of currency is your ability to exchange it. No matter how hard you harrumph to this notion, its public perception is the value.

What is your point? This isn't being disputed. What is being disputed is that you overshoot with the power of what you mean. Of course the global financial system and the value of the money is based on perception, and that perception functions on some real hard well entrenched global trade mechanism and is covered by a massive global financal regime.

You think the world can suddenly perceive gold is the right way to value things and the everything adapts to it and starts functioning? I mean what point are you trying to make here?

Hence why throughout history, until relatively recent time, it has always been backed either directly by metal or by other assets.

There hasn't been a global trade system and global financial system until recently.

Anyways, what is your point with this?

The concept of fiat currency is not proven to be the best - it is simply something bankers wanted for their own benefit some century ago and benefit they did and still do.

So bankers simply wanted to free capital movement from gold-peg and the whole world bowed down? You believe that is how political-systemic change works? Some elite wish for it and the whole world adapts?
Try stagflation of the 1970s. Try the structural limitations of national economies that was faced in Europe and US. Try the extremely high level of inflation under the Gold-pegged dollar system...

Hence the current system, where American wagies subsidize American banks, and then foot the bill for bailouts when those banks fail anyways. Very fair, liberal and democratic, All Heil the global liberal order!

Bro, most of the executives of those banks do not even own those banks. The reason banks were bailed out was because the whole world was collapsing. Was the solution smooth? No. But what exactly is your alternative? Nothing. Just criticize. No one is sucking up the power imbalance, elite relations in impacting the outcome of wealth distribution etc. But your worldview is extremely narrow. It is all 1s and 0s for you. You seem to have a trouble with the complexity of reality.

So yeah, if we look at this strictly pragmatically USD and EU are nothing more then just paper - paper that enough of the public believes can be exchanged for goods or services.

Your argument doesn't flow here. Bankers wanted to get rich, rigged the system and so EUR and USD are nothing more than a paper....right...

Now the problem with the mess that is current fiscal system in US and West in general is that its financial institutions can create currency out of thin air, thus driving its value down.

Yes they can. And that is not a problem.
Ideally, they only do it in line with the goals set by the central bank. That often revolves around a balance between wages, unemployment, inflation and growth rate.
Central banks are not "investment banks"...they are not driven by profits. They are academics. The whole world watched the central banks and their decisions. Whole financial world pre-prices things on what the rational action would be, BEFORE central banks. So central banks don't really go do their own thing. They watch the world and act according to global financial balance and domestic economic parameters...unless you have dictator who orders the CB what to do. In such scenarios, like Erdoğan and his anti-globalist advisors, we see the leader tell CB exactly what the opposite of what is expected of a CB.

When a pandemic like COVID hits the economic activity, you print money and lower interest rates. That is NORMAL. Even if there wwas no central bank, this is what would have to be done to stimulate economy. And you would have gotten inflation regardless.
Again, this has nothing to do with the "evil secret investment banks".

Hence hyperinflation, via which majority of population is "taxed" out of value of its own earnings. Which, IMO, is the real reason why this system is in dire need of a reform, as majority of people subjected to it do not benefit from it, yet are forced to support it.

The financial system does needs reforms. Perhaps even the problems can never be solved. Perhaps the problems are structural and inherent to the way capitalism works.
But the one thing that the FIAT system has succeded in is getting rid of the inflation. It is hilarious to call the inflation of today "hyper". We are going through an extraordinary time. This much is expected. A lot of the inflation is also due to base effect if you look into data. It is very easy to see.

You do realize that EU bonds are literally in NEGATIVE REAL INTEREST RATES? Until recently, so was various US debt assets. The inflation was in fact so low that EU and US had to keep rates eeeeexxxtreeemely low. You do realize that the FED funding rate is 0-0.25% right now? It's at the BOTTOM.

In my country, Turkey, where we have a leader who hates the global financial elite, we have an inflation of 30-40%
We literally cannot price anything here anymore..and guess what we do? We buy USD assets. Because USD is a solid "convention".
Just the rumor of FED increasing interest rate in the following 3 months was enough to create a sell-off. People in the world of finance are aware of how FED communication works. They cannot do anything suddenly. So they act slowly, managing expectations to let steam off. It's like sailing a ship in a storm. You have to be careful, be balanced, take things slow.
The tapering process was enough take the heat out of various markets, and I am pretty sure the following few months combined with normalization of economic activity will easily manage inflation.

Lets back this with some simple data:

https://data.worldbank.org/indicator...ns=US-GB-DE-FR

The gold-peg, that is, money being backed by some metal was dropped in the 1970s. The world adapted to the FIAT currency from 1980s and onwards. Neoliberalism has created many many problems. But inflation is not one of it. As you can see, since the FIAT currencies were adopted, inflation had hand around 2% on average for most developed nations. This is the structural inflation that is necessary for a growing economy.
Hyper inflation in the current financial system?
Last I checked, the problem with current economic system and financial model on it was DEFLATION.

With all the structural dynamics of the current world economy, especially with aging populations, what is expected is even more deflation. The problem of inflation is a story of the past 2 years for obvious reasons. A once in a century global catastrophe tends to do that. But there is not a single reason to believe the current slight increase in inflation is going to be permanent. People seem to fail to understand the difference between quantitative easing where the cash does NOT get injected into the real economy and actual money printing...

[dogukan]

For those interested, this guy gives a great picture of why inflation is not only not a problem, deflation is the medium-long run problem with the current system:
https://www.youtube.com/watch?v=xMPJ3Bu4KbI

I personally refuse to believe people have the memory of fish, I actually believe that the curreny hyperinflation discourse is there to serve a political agenda of certain groups.
Here: https://www.youtube.com/watch?v=zrKxIuDBfFY
Just before the pandemic, the big issue in EU and USA was "Japanification". This is very recent
In fact, current inflation wave has likely given the world some breathing room before we go into another deflationary stagnation.

[swabian]

For those interested, this guy gives a great picture of why inflation is not only not a problem, deflation is the medium-long run problem with the current system:
https://www.youtube.com/watch?v=xMPJ3Bu4KbI

I personally refuse to believe people have the memory of fish, I actually believe that the curreny hyperinflation discourse is there to serve a political agenda of certain groups.
Here: https://www.youtube.com/watch?v=zrKxIuDBfFY
Just before the pandemic, the big issue in EU and USA was "Japanification". This is very recent
In fact, current inflation wave has likely given the world some breathing room before we go into another deflationary stagnation.

But of course... It's all made up to attack the left. How generous of you to endorse marxism, even though you work in finance by the way. Ugh...

Inflation of this magnitude is bad, there is no doubt about it, except for some fringe contrarians. Wage raises for example are already 50% behind inflation, which means people do lose their purchasing power over time and this is not going away in a few years. Yes there will be a deflationary chapter after this is all over, but in the meantime, wage dependent people will lose money forever. Nobody can simply sweat it out.

[dogukan]

But of course... It's all made up to attack the left. How generous of you to endorse marxism, even though you work in finance by the way. Ugh...

Uhhh...what? Where did this come from?

Inflation of this magnitude is bad, there is no doubt about it, except for some fringe contrarians. Wage raises for example are already 50% behind inflation, which means people do lose their purchasing power over time and this is not going away in a few years. Yes there will be a deflationary chapter after this is all over, but in the meantime, wage dependent people will lose money forever. Nobody can simply sweat it out.

Inflation of this magnitude is bad but it was expected after the attempts to recover from covid. It was a global effort. All countries had to qe the hell out of markets.
And yes, this left people's wages lagging. Lol, you should have seen my wage in Turkey. We had an inflation of 30-40%, and this is only the official number.
But in a year or so, unless the covid situation continues to ruin the markets and the sudden bottleneck issue with global supply chains is solved, inflation would not remain a long-term problem.

The economic structure is deflationary, so there is no reason to think there will be chronic inflation. That being said, it is still wise to chase stocks or other assets if one can afford to stay ahead of inflation.

[EmperorBatman999]

The economic structure is deflationary, so there is no reason to think there will be chronic inflation. That being said, it is still wise to chase stocks or other assets if one can afford to stay ahead of inflation.

I am no economist or monetary theorist, but how is the market deflationary? What I hear economists say is that the only thing worse than inflation is deflation, because deflation encourages saving (why spend $1 for this widget today when I might be able to buy two widgets for $1 tomorrow?), and saving pulls money from the economic cycle, which overall reduces the incentive to produce goods and services due to lower demand. Are there any prominent economists who argue against this paradigm?

[dogukan]

I am no economist or monetary theorist, but how is the market deflationary? What I hear economists say is that the only thing worse than inflation is deflation, because deflation encourages saving (why spend $1 for this widget today when I might be able to buy two widgets for $1 tomorrow?), and saving pulls money from the economic cycle, which overall reduces the incentive to produce goods and services due to lower demand. Are there any prominent economists who argue against this paradigm?

Deflation has exactly the consequences you mentioned.

But the current inflation discourse is mostly political. It is to get at the governments who were expected to QE or even launch counter-cyclical public programs. Since the discourse is political and almost every opposition at every country wants to bank on what was already expected to happen, the overall feeling that there is a major risk of inflation is overhyped. There is also a political movement of sorts where retail investors tend to believe they are taking on the system, so often on online platforms you will see the "inflation hype" a lot more than the more sound, realistic analyses of cold global financial institutions.

Mind you, such structural inflation traps can occur in developing countries, but for it to be permanent in developed countries of today is a lower chance. This is not my opinion btw, I too have been reading a bunch of financial analyses here and there.

A bunch of factors to keep in mind:

* the developed world is literally scraping the barrel with interest rates. The real interest rates are in negative areas. You literally lose your money for putting it into bank and yet you end up having to do that. The first thing this means is that central banks have AMPLE room to hike rates and easily control inflation. The only reason they avoid taht is to ensure growth will not be slowed too much. But the moment inflation reaches a level that can be considered dangerous, inflation rates can easily go up. We are taking 0% interest rates. In many developing countries, rates can range from 8, 10, 15 or above 20s. Economies still survive this.

* Overall, there are aging populations in developed countries. These people save more and spend less. Each passing year, the amount of aged population increases. Their desire to save pushes interests structurally down because there is too much money. Money is cheap. Interests (aka cost of capital) has to be low. There simply isn't adequate demand to fire up inflation structurally on the long run.
This is precisely what happened in Japan and EU is also headed there. What keeps US economy relatively balanced is their constant absorption of population through immigration. USA still manages to have a dynamic demographic structure where the young and old populations are relatively equal in size.

* There is overall a slowdown of economic growth all over the world. Even in developing countries. 2 reasons for this:
1- Demographic decline is a global phenomena with the exception of Africa. But all counries after a while go through a slowing in pop growth. The rapid urbanization even in underdeveloped countries is slowing demographic growth.
2-Productivity growth is declining. This is a major problem of global capitalism but that is not the issue here. Normally, productivity growth is a deflationary process, because goods per money circulation increase with it. Threfore one would expect slower productivity growth to inflate economy because money supply is faster than goods&services growth.
However, there is a political side to this; governments try to create an environment of growth as productivity growth declines. So the reaction is NOT to print money (we are talking about since 1980s and FIAT) but to increase leverage. Sİnce the 1980s, there had been a massive growth in debt per governments, companies and households. The downside is that global economy is VERY sensitive to this and it can cause massive financial crises if not managed properly.
However the high leverage means that people often take position to pay their loans back. This decreases future spending expectations. Instead of government money printing, we get large debt with lowered productivity. The long term consequence is deflationary behaviour.

There is more to this. Increased credit supply (if the financial system does not collapse) makes credit cheap. So it pushes the interest rates (and real interest rates) down on the long run. As you can see, this ties to the first point I made. So you can see how there is a positive feedbackloop that is deflationary.

* More futuristic stuff: Automation in coming at a rapid pace. This creates downward pressure on wages and hence inflation. It can boost productivity as well, which would also be deflationary.



So as you can see, there a bunch of structural deflationary trends for long run. That is why I really doubt there is a risk of bad inflation in developed economies. Just before covid, the world was stuck with deflationary trend threats. Covid actually seems to have bought us some time...

[Heathen Hammer]

I think the primary issue with apologia for central banking system and fiat in general is this somewhat irrational and weird assumption that Federal Reserve is some kind of sagely council of wizardly wise men with everyone's best interest at heart. While in reality we are talking about people whose goals aren't as academic and are downright predatory, as hyperinflation has robbed millions of Americans of the value of their income throughout the past decade. Hyperinflation, in this regard, is not a bug, but feature, it is something fiscal elites want to keep the gravy train going.
"Global trade system" is something, end of which will greatly benefit humanity. Not just from environmental perspective but strictly from humanitarian positions.
The silver lining about "global trade system" ending is that it will inevitably lead to either change or overall end of the current "global liberal order" - which means a great benefit not just to environment and planet overall, but also to populations of the world, that are being robbed by predatory financial groups like we see that in US and all over Western world and similar process is likely affecting the rest of humanity as well, not to mention that it only benefits a small minority of people at the "top of the food chain", so to speak, while everyone else loses.
Such system is both morally deplorable and practically unfeasible in the long term. As per the articles I presented in OP, it will only get worse, as purchasing power of majority of population drops, while prices continue skyrocketing.
At some point we will either hit the Weimar-style fiscal rock bottom where we will have to use wheelbarrows of USD to buy bread, or we abandon the broken central banking system in favor of something that is less archaic and outdated.
We simply need to realize that the world of 1900s that the status quo allegedly represents is dead. Just like liberalism, globalism and trickle-down economics, central banking and fiat monetary system are archaic and outdated financial systems and forcing them on modern economies is just as crazy as trying to implement copies of medieval reforms.