A Return to "Normal" Inflation

Globalization has been disrupted. Initially cause by Covid pandemic that led to supply chain disruption causing national governments to rethink dependency upon other nations especially if they are geopolitical rivals. A partial deglobalization if you will. This is structural shift in the world economy not merely a normal cyclical shift. The deglobalization leads to higher inflation as strategic concerns of nation to movement of production to more expensive locales.
The structural shift causes great uncertainty resulting higher commodity pricing adding to inflation.

In conjunction with the above there is the rapid aging of the world population that means less workers & higher wages driving inflation though that is ameliorated by advances in automation & AI. And that aging population will drive health care expenditures that in advanced nation is provided by national governments which will increased taxation of individuals & corporations driving more price increases & reduced disposable income equating to more inflation.

The above means a return to “normal” inflation-4-6%. The Fed will keep raising interest rates to prevent a return to double digit inflation. But national governments would like a return to “normal” inflation to inflate away high national debts. In effect stealing money from savers and old people slowly. The slow part is important in order for the pain not to become too apparent resulting pitchforks & worse–voting out of bought established politicians.

Can “zombie” survive “normal” inflation.? If not that will increase downward pressure on the stock market as those “zombie” corporations bankrupt.

Global debt rose by 28 percentage points to 256 percent of GDP, in 2020, according to the latest update of the IMF’s Global Debt Database.

Debt increases are particularly striking in advanced economies, where public debt rose from around 70 percent of GDP, in 2007, to 124 percent of GDP, in 2020.

This rate of debt growth is unsustainable.

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@tjscott0 - Thanks for this. Yet another reason why I think that 2023 is going to be really challenging and will be reflected in lower values / prices in the equities market.

'38Packard

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