Sustainability in Monetary Field May Accompany us to Better Future
Abstract:
Inflation and deflation have accompanied humanity since the beginning of history. But they will be overcome when humanity has taken the path of neutrality with nature. Meanwhile in the West we are dealing with an unexpected (perhaps) inflation and in China with deflation, half of the continents suffer from inflation and the other half, in part, from deflation. Unlike the last century with widespread inflation “erga omnes”. They are anomalies that cure various excesses in the economy. Inflation appears if development is pushed beyond measure. Deflation occurs when indebtedness is excessive, and speculation fuels the disorder of the economy. Monetary policy has demonstrated that it has the weapons to defeat inflation with the success achieved in the early 1980s by Paul Volcker at the Fed. Now we are once again grappling with Beware inflation. It does not have the characteristics of the sixties and seventies of the last century. It does not arise from undue pressure on the development button, but from the rise in international prices, fueled largely by speculation. Not only that, but it is also highlighted by the retreat of deflation in the West, where the economy recovers after the COVID 19 epidemic. It is the unwelcome legacy of the previous decade of deflation, during which zero interest and cheap credit lulled speculation on fossil energy prices and assets. Is the anti-inflation strategy of the last century useful? Unfortunately, not. The increase in interest rates has no power on international prices. Not even the recession, invoked by some, comes of any help. The drop in core prices we are witnessing does not depend on monetary policy but on the new equilibrium in consumer prices that we know realizing after the surge. So, has restrictive monetary policy failed? Absolutely not. The increase in interest rates was essential to hit reckless speculation, with the increase in the cost of credit. Furthermore, it is absolutely essential that interest rates remain high, opposing the greed of speculation which postulates an unlikely decline in the cost of credit.
