Stagflation

 

What is stagflation?

The economy is readily understood once you ignore all the worlds economists and politicians. The economy is made up of two basic parts:-

1) ENERGY

2) PEOPLE

Energy

What we really mean here is oil. For GDP growth we need more oil extraction this year than last year. Forever, or the ‘economy’ / society as we know it collapses / ‘resets’.

People

What we really mean here is productive people. Each year the productive people need to produce more, collectively, or the ‘economy’ / society as we know it collapses / ‘resets’.

Stagnant Economy

This is the ‘stag’ part of stagflation. This means that we are failing to ‘pump’ more oil than last year.

High Inflation

This is the ‘flation’ part of stagflation. This is where total productivity is lower than last year.

Society

What a world we live in. Each year we must be more productive than the year before or our standards of living decline. Each year, we must burn more oil than last year or our standards of living decline.

1970’s Stagflation

We got out of our last battle with stagflation by the use and development of computers, which made us, collectively, far more productive. Also, a deal with Saudi led to the resumption of the increases in oil production.

2020’s Stagflation

Last time it was the rise of computers. This time it needs to be the rise of robots and artificial intelligence. Plus, as oil supply can no longer be increased we need to increase some other supply of energy. You may see evidence of China burning ever more coal and this helps reduce the necessity to burn oil. Thus increasing energy supply, albeit not oil which has been the traditional method.

The World Economic Forum

Their solution is for us all to reset quickly down to the standards of living we had in the fifties and sixties. This solution, drastic as it is, only lasts for 30 – 40 years. Then we perhaps reset back to the 1850’s and perhaps get to play the game for 15 – 20 years before another reset.

Critical Thought

Perhaps we can do something much better instead? Perhaps.

Now we know how important it is that people are ‘productive’ we can perhaps identify unproductive sectors and reduce them.

Now we know how we must continue increasing energy production, we might need to re-think ‘net carbon neutral’. Instead of using fossil fuels, perhaps we increase our nuclear energy capabilities.

This buys us time to restructure society such that we have a system where we don’t continually require more energy use than last year and more productivity than last year, just to maintain our standards of living.

Financial Literacy

Once you fully understand the above, you will know more about how the world works than most politicians and more about how the economy works than most economists.

Conclusion

The very low number of people who have demonstrated an understanding of both parts of ‘stagflation’ is embarrassing.