Austerity is the new global standard with Governments all over the world trying to get balance back into their sovereign debt. The knock-on effects are there for all to see. The Greek people have reacted violently and have almost become ungovernable and
this is opening the door for the radical far right and far left to step in with what might be odious reforms. France has reverted to type and a socialist government is likely to do exactly the reverse of the previous and in Holland and Spain we can see the
writing on the wall.
Unfortunately at the time when leadership is required Politicians are often found wanting. What is leadership? Today in economic terms where social breakdown is at risk, governments should be able to demonstrate to society that they have a workable plan
that will provide a secure future and some prosperity. Intentions of this type will carry the people for a while but they will need assurance that the pain is being treated and diminishing.
Economically are we seeing the pain receding? The answer has to be no! The economic problems are global. Who do you sell to if your buyers are all constricting and suffering as much if not more than you?
The problems today are a parallel syndrome within a long term cycle, where everyone is unable to introduce anything that breaks away from the downwards spiral. Austerity and deficit controls will have no impact in this condition. Something new has to be
In the seventies inflation was the result of the type of austerity we had then. This was a creation initially of a global oil crisis but also a reduction in the spending power of society and the rebalancing of industries. Japan and Germany performed very
well in the period as did the USA but others had to find alternatives.
Out of the seventies the world went into a massive creative rebound with new industries around communication especially mobiles and the internet that enabled great wealth to be spread around society. Proportionate of course to where you lived in the world.
In the seventies the result of growth and expansionist policies was periods of high inflation. Now providing you have a secure and steady job a period of inflation is a good thing. House prices increase along with wages enabling the beneficiary to fuel local
economies and then wider. However, the poor suffer massively.
Is an inflationary strategy something that should be tried today? Could an inflationary strategy be controlled and turned off and on depending on the effects?
Would inflationary strategies create the method to reduce the value of debt?
Now Germany would especially be anti any inflationary policy although they are operating their own form of quantitative easing, surely this will eventually manifest as inflationary.
So the question is this, is inflation inevitable, but could it be a tool for good, to break out of the current mess or must it be fought at all cost?