Money printing or stock market crash? – To illustrate the concept of ” vicious circle “, it suffices to observe the monetary interventions of central banks. Especially the one that has the most impact on the world: the Federal Reserve American (the Fed). The latter has printed phenomenal amounts of dollars because of the economic crisis of the Covid restrictions. It now has to fight the inflation it has caused. This, by threatening to do collapse the financial markets. Especially those in emerging countries, as worried United Nations. Unless maybe… reprint. Repeat again.
The UN on the verge of a nervous breakdown over the actions of the Fed
This will not have escaped any consumer, the prices are soaring at the same time as inflation gallops in all the countries of the world. The fault lies mainly, not with the conflict in Ukraine, but with the quantitative easing (QE, or “quantitative easing”) and other money printing led by central banks around the world, led by the US Federal Reserve.
Indeed, the money supply (M1) US Dollars simply exploded in 2020/2021 as can be seen in the chart below. It has gone from less than 4 trillion dollars before the first Covid restrictions (March-April 2020), to more than 20 trillion dollars since the end of 2021. Either a nice +400% !
And many central bankers around the world – those at the European Central Bank (ECB) in particular – have done the same. No, the current dramatic inflation does not come out of the hat of the Ukrainian conflict. It was only the last straw that broke a vase filled more than to the brim.
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The United Nations asks the US central bank to calm its rate hikes
This money spillunprecedented in its gigantism, has therefore provoked inflation that is no longer “transitional” or “temporary” trumpeted by the Fed not even a year ago. In a recent report of the United Nations Conference on Trade and Development, it is the response to this inflation that is denounced.
Indeed, the Federal Reserve conducts hyper-aggressive policy rate hikes in an attempt to stem the increasingly freewheeling inflation. In addition to doing stock market crash with each announcement, the UN denounces the fact that these rate increases “hit the poorest hardest”.
“(…) About 90 developing countries have seen their currencies weaken against the dollar this year. Even more than -10% for more than a third of them. (…) The prices of basic necessities such as food and energy have skyrocketed. (…) A stronger dollar only worsens the situation, by increasing the price of imports in developing countries. The consequences are devastating for the world’s poor. (…)”
United Nations analysts believe that US interest rate hikes could “reduce by 360 billion dollars” the future incomes of developing countries (excluding China).
Equally dramatic, this strength of the dollar caused by the Fed will increase the debt burden countries that were contracted in US currency. The UN therefore urges central banks to calm down quickly their rate hikes. And why not, go so far as to reprint magic money, like the Bank of England recently, which has already closed its vicious circle.
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