After all, “they can always print more money.” That’s always the solution until it becomes the problem.
What we call economics is best understood as:
1. A mechanism that distributes resources asymmetrically: some benefit more than others.
2. The running of the herd: humans are a social-herd species.
3. Everyone seeks a windfall: something for nothing, or grabbing more while doing less.
4. Everyone seeks to make windfalls permanent by rigging the mechanism to favor their interests.
5. The mechanism is a system of self-reinforcing feedback loops that generate diminishing returns, blowback and unintended consequences.
This perspective helps us understand the progression of the economy from 2021 to 2024. In a nutshell:
2021: massive stimulus, “meme stock” bubble
2022: “Revenge” splurging, inflation
2023: AI stock bubble, “soft landing”
2024: Forced Frugality
So massive stimulus initially triggers the locked-down herd into meme stocks, inflating a bubble. Once the lockdowns end, this massive stimulus unleashes “revenge spending” where price no longer matters, we need a vacation, a new wardrobe, etc., never mind the cost.
Unsurprisingly, this tsunami of price-insensitive spending while the distribution mechanism was still struggling to reconnect disrupted global supply chains leads to 1) rampant price gouging / profiteering and 2) rampant inflation as costs are passed up the food chain.
Many costs are “sticky” and rarely decrease: taxes, fees, wages and benefits, healthcare, rent, insurance, childcare, etc. typically only ratchet higher. Any ratchet lower is rare and modest, and eventually reversed.
