In the late 1970s, an unprecedented event occurred: both inflation and unemployment surged simultaneously. This left leading economists perplexed, as it defied all their academic teachings.
According to the Phillips curve, there exists an inverse relationship between inflation and unemployment; as one rises, the other should fall. This theory was initially presented by economist William Phillips, who analyzed wage rates and unemployment in the UK from 1861 to 1957. His insights provided a seemingly reliable model that central planners could utilize to navigate and optimize economic conditions.
However, the inflation-unemployment paradox of the late 1970s challenged this theory, as both metrics soared together, contradicting the fundamental principles of the Phillips curve.
In truth, the Phillips curve was a case of elegant nonsense—its predictive power held until it didn’t. Continue reading
One would think that Federal Reserve Chair Jay Powell and Treasury Secretary Janet Yellen would have known better.
During much of 2021, they insisted that consumer price inflation was merely ‘transitory.’ Their failure to recognize the inflationary trends has contributed significantly to the current economic predicament.
Now, the issue of soaring consumer price inflation appears to be here for the long haul, likely to dominate discussions in 2022. Additionally, the Federal Reserve’s attempts to manage and curb it promise to lead to further complications.
Central bankers often operate under the illusion that they can control the economic landscape, believing they can, in the words of Omar Khayyam, “remould it nearer to the heart’s desire.”
However, in reality, they are usually left responding to the consequences of their prior decisions. Ben Bernanke, the former Fed Chair, kick-started the aggressive quantitative easing (QE) initiative in late November 2008. At that time, the Fed’s balance sheet stood at approximately $800 billion—now, over 13 years later, it has ballooned to more than $8.7 trillion, increasing tenfold. Continue reading
Welcome to 2022!
The first edition of the Economic Prism for this year is filled with bold forecasts and educated assumptions. Today, we utilize our unique perspective to examine the upcoming twelve months. What lies ahead?
To begin with, 2022 promises to unfold with every event happening as it is destined to, a dynamic blend of good and bad. Each day will bring a unique mix of challenges and opportunities.
But what else can we anticipate?
Will the price of gold rise above $3,000 per ounce? Will Beeple sell yet another NFT for a staggering $69 million? Will a Starbucks coffee cup cost $10 before we reach year-end?
What will become of the S&P 500, the yield on the 10-Year Treasury note, and crude oil prices?
Will the Fed’s tapering trigger upheaval in both stock and bond markets? Will Dr. Fauci face his long-overdue reckoning in Washington? Will China take military action against Taiwan? Are we on the brink of a global conflict over Ukraine? Are we entering an age of societal upheaval? Continue reading
The American public’s trust in its government is at an unprecedented low, and there’s little chance it will improve anytime soon.
For instance, President Biden’s recent escalations of fear surrounding the omicron variant, warning of a “winter of severe illness and death for the unvaccinated,” are clearly deceptive. Breakthrough infections among those vaccinated are too widespread for his proclamation to hold water, indicating that his rhetoric is politically motivated rather than genuine advice.
The mRNA vaccine’s effectiveness has waned after numerous changes to the virus, rendering it largely ineffective. Can we genuinely trust what Biden says?
Moreover, the public health sector, akin to the government as a whole, has lost significant credibility due to an air of corruption and deliberate misinformation. Notably, the National Institutes of Health funded risky gain-of-function experiments at the Wuhan lab, and Dr. Fauci has twisted the truth in the process.
This governmental apparatus, along with its legions of dependents, has been sustained by harmful fiscal and monetary policies. These flawed economic strategies—totaling approximately $8 to $10 trillion in the last two years—have not only fueled rampant inflation but also exacerbated wealth inequality and societal stratification. Continue reading
In conclusion, the interplay of economic theories and real-world decisions has shaped our current landscape in profound ways. As we navigate through these trends and changes, it is essential to remain informed and critical of the narratives presented by authorities to better understand the challenges ahead.
