Prices are rapidly increasing across the world and inflation today is at a level not seen in most developed countries for about forty years. Nobody believes yesterday’s stale stories about price increases being a passing phenomenon anymore. At the same time, only fools would believe the premise that this is “Putin’s inflation”, caused by the war in Ukraine and the increased energy prices. The inflation is happening because the Western economic and political elites wanted it to be. What is such a radical position based on?

The inflation did not start when the war in Ukraine did. It had started picking up speed back in mid 2021. Despite the signals of danger, the Western central banks indifferently shrugged their shoulders, using any excuse they could come up with in the moment to justify the price increases. They continued with the large-scale printing of money like they have been doing with various pretexts for over a decade, with constant delays in increasing and normalizing the interest rates. An accelerated increase in interest rates may cause a deep recession, which explains the Hamlet’s dilemma facing the central banks… year in and year out. The European Central Bank’s interest rate remains negative today, despite the inflation rate being over 7% — the ECB ought to keep that rate at a maximum level of 2%. The American Federal Reserve System has started increasing its interest rates, announcing more increases by the end of the year, but it will most likely be insufficient to contain the inflation.

With regard to “Putin’s inflation”, we are facing a phenomenon never seen before. The price of energy increases when the demand does, or when the cartel of manufacturers autonomously increases the prices. this is the first time in modern history that energy buyers have ever independently chosen to raise the prices of the product they are buying. Even though Russia had not suspended the export of gas and oil (until yesterday), the Western countries, deeply shaken by the war in Ukraine, had announced that they would completely abandon the import of energy from Russia. (Admittedly, the Western countries, unshaken, have been announcing similar moves years back.) To avoid the slightest possibility of a dilemma, that type of statement is being hysterically repeated on a daily basis. Only an absolute amateur would be unaware of the consequences that those statements have on the price of energy. It is difficult to believe that their goal is not precisely to skyrocket the prices of energy, in order to give an extra push to the raging inflation.

If the geopolitical reasoning behind this policy is abundantly clear, then what could be the economic aims of a pro-inflation policy? Inflation combined with low interest rates devalues the existing, enormous debt of the countries. When the debt is calculated against the GDP, significantly increased by the inflation, the debt ratio will appear to be significantly lower. The Western countries are now announcing a large increase of expenses for weapons and for funding the energy transformation. Thanks to the inflation, this increase in public debt will also seem more bearable.

The increase in energy prices will also help reduce the price gap between fossil and “green” fuels. The process of switching to green energy, previously slowed down by significant resistance, will now pick up speed. If that does not quite happen, the profits of the energy companies will blow up, to the joy of the shareholders and their friends from the political arenas. Citizens will get used to the high energy prices and start saving more. The Western families’ standard of living will further drop, but food and energy make for a smaller share of their home budgets than is the case in the rest of the world. Finally, something will have to be sacrificed to the aim of expanding the NATO east. The local elites will pass the blame for the poverty of their citizens on to Russia and in doing so absolve themselves from the culpability for an economic policy that they have been leading against the best interest of their citizens for several decades. Excellent, couldn’t be better.

The greatest casualties of these economic processes and the aforementioned turmoil of the West will be developing countries. Their budgets, already seriously troubled by the pandemic, are now further threatened by the increase in the prices of food and energy. The debt of these countries will continue to rapidly grow, they will be hit with new increases in interest rates, as well as the likely global recession. A large number of countries will find themselves on the edge of bankruptcy and societal chaos, like Sri Lanka today. Some countries will see mass famines, and there will be new waves of refugees.

Unlike developed economies which are able to print money as needed, developing countries do not enjoy that privilege. They will have to beg, hat in hand, Western mints and international organizations controlled by the West. And when that happens, political conditions will follow the usual economic ones. The countries that seek funding will have to clearly take a stand on the side of “virtue, justice and a free democratic world”, in the acute stage of the geopolitical madness. Excellent, couldn’t be better.

Let me say it again — Everything we are seeing is just a dead end of the global economic system being held up by force, through constantly creating chaos and inciting military conflict. God forbid that someone should get the idea that people have become an obstacle to the new world order or that someone feels like there is too many of us.

(Politika/Nebojša Katić’s blog)