Today’s economic crisis isn’t like others you remember.
Governments are reluctant to invoke the word recession. It doesn't poll well. Grumblings about widespread and obvious economic hardship need to escalate considerably before political calculus decrees the threshold met to drop the term. Sadly, that doesn’t begin a mature, nuanced or informed public discussion about the economy. Politicians in every camp express compassion for struggling families, trusting we’ll ignore their role in creating today’s level of public fiscal vulnerability.
Dumbing down and oversimplifying talk about economics is a cornerstone of how we got here. We measure the overall success of the economy through growth of GDP, which treats calamities as good news. You or I look at a toxic train derailment as a nightmare, but GDP counts it in the plus column. Similarly, employment rates consider only the number of jobs to avoid discussing declining job quality. Destroy a thousand secure full time living wage jobs, replace them with two thousand insecure poverty wage part time gigs with no benefits, and headlines will fanfare job creation hallelujahs. Breaking down any complex topic to focus on only one factor often conceals more than it reveals.
Hyperpartisans also flood the zone with shit by always declaring every ill in the world solely and unforgivingly their political opponents’ fault to keep a misinformed base riled up. Even in a system that consistently treats job numbers going up as good news, bad actors will tell us it’s actually bad news if the wrong party does it. Anything other than unconditional surrender to their ideology gets framed as enemy action every day.
So let’s talk inflation.
Inflation isn’t a disease, it’s a symptom. Symptoms can have several different causes. Sometimes a headache is simple dehydration. Sometimes it’s a brain tumour. Treating it effectively depends on knowing the difference. Like every complex system, inflation also doesn’t boil down to a single factor.
Like a doctor who reaches for chemotherapy drugs at the first sign of headache, central banks approach every appearance of inflation the same way: by repeatedly bringing down the hammer of higher interest rates. It’s a great…