Can inflation actually be fixed? Is there any hope? Or will prices just gradually keep increasing?
In: 45
The USD is a monstrous entity which is used in international commodities trading, corporate stock trading as well as personal transactions making it incredibly tenuous to market forces. Fiat currency is by definition unstable as it is not backed by a commodity but instead faith that the fiat holds value. This enables the Dollar to be used to transact at virtually unlimited volume, which a commodity based currency cannot do. As more dollars enter this system the value of each dollar decreases which alters the value proposition forcing all actors in the system to constantly adjust as market forces fluctuate with wildly increasing and decreasing commodity values. This is why recession is inevitable, eventually the value of the dollar becomes too low to maintain faith so the fed crashes the dollar to remove volume from supply thus increasing value and therefore faith in the value of the dollar.
ELI5: China wanted into the international trade order so Nixon changed the dollar to accommodate the expected volume increase. This move created the 1970’s financial crisis but once stability of the fiat was established it enabled the boom of the 1980’s and 1990’s as globalized commodity trading became more simple. HWBush and Clinton established the USD as the petrodollar forcing all nations too keep USD in reserve to continue purchasing petroleum, thus creating demand for the dollar, therefore increasing it’s value. This move caused the financial crisis of the late 90’s so to stabilize the USD WBush invaded Iraq and Afghanistan to eliminate competition and cement demand for the USD. This move caused nations to lose faith in the USD fearing America would prioritize it’s own control over the international trade economy over the stability of that trade order, this cause the GFC (2007). Obama enabled quantitative easing to enable his corporate donors to borrow unlimited money at little cost and Trump escalated this policy with his 2017 tax reform. COVID halted the global economy and demand for oil, thus reducing faith in the now massive volume of USD causing the crisis we are in right now.
Sorry, I’m bad at conclusions.
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