Warning from a Globalist : we are preparing the Discontinuous inflation

OCTOBER 27, 2021

JAWS

Sometimes dangers loom long in advance; we have time to prepare for them and to avoid them if we are serious. Too often, however, even if the warning signs are more and more present, and convinced that the problem will resolve itself, we do nothing and we do not take any serious precautions to avoid disasters.

We all know this in our private lives, or in those of one or another of our relatives, when we refuse to take seriously health alerts, small failures at work, emotional annoyances; all signs that one wants to believe to be unimportant and that one prefers to neglect. We are also familiar with this in the lives of nations that did not take obvious threats seriously, such as when a bellicose neighbor rearms himself at high speed, or when a deadly ideology begins to ruin the national consensus. We also know this on a human scale, when we do not take as seriously as we should the climatic tragedy which is before us;

There is also a whole other source of dangers, which, unlike those which precede, announce themselves much less or even not at all, and which then strike brutally, fatally, without warning. This is the case of certain illnesses, of ruptures in a cloudless sky, of unforeseeable bankruptcies, of dismissals without justification.

It is also the case of brutal and deadly dangers for societies. Thus, for example, of a danger that lurks everywhere, still invisible: what I will call “discontinuous inflation”.

Consumers today do not really feel it, because, statistically, overall, prices, for them, remain relatively stable, and the increases in certain products, (such as fuels at the moment), are offset by the decreases. others, such as household equipment or clothing.

And yet, everything is being prepared for very high inflation to kick off suddenly, what I call “discontinuous inflation”.

And this is the main thing: it will not be a gradual increase in the rise in prices, which would go from 2% to 3%, then 4%, and 5% per year, slowly eating away at the purchasing power of wages and the value of savings, and that could be stopped by using the classic weapons of monetary policy, which are interest rates and credit restriction. It will be a very sudden inflection of the rise in prices, which would drop in one year from 2 to 8 or 10%. Discontinuous inflation.

The mechanism of this disruption is in place: If the massive increases in raw materials and intermediate products, aggravated by countless shortages, have not yet been passed on to consumers, it is because, for the moment, producers of consumer goods are obsessed with the challenges of competition. And, for the moment, these firms in contact with consumers are fairly cushioning the shocks, to remain competitive.

But, at a still undecidable time, if rising input costs and shortages of all kinds persist, one or the other of the world’s major producers of food, vehicles, or household equipment will give in and increase. its prices massively. Brutally. It will then be very quickly followed by its competitors who will have waited only for this to improve their accounts.

In other words, as in “Les Dents de la Mer”, (JAWS) everything will be fine until it is too late and disaster is inevitable. Because, at that moment, no weapon available will be able to prevent it any more: the rise of the rates will not be useful any more; restricting credit will cause recession without controlling inflation. And then we will no longer have the choice, (as in past episodes of the same genre) than between wage indexation to protect people’s purchasing power, or an austerity policy to save the state. This choice may be coming soon …

What I write here about the economy is also true for politics: we are no longer very far, in France as elsewhere, from a possible radical institutional change, from a real democratic discontinuity. We cannot say that we have not been warned.

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