And as a bonus question, how have we fallen into the same problem we did just 14 years ago, how did no one think “let’s do it differently this time guys!”
In: 6
What follows is the Official Story of most mainstream economists and government officials. Other ways of thinking are possible [1].
2008 problem: Too many bad debts cause a lot of banks to nearly collapse at the same time.
2008 Solution: Print a bunch of money to give to the banks so they didn’t all collapse.
2022 problem: Print a bunch of money because nobody’s going to want to buy anything because COVID, then COVID isn’t as bad as we feared, plus sanctions / Ukraine invasion / oil prices / China’s zero COVID policy means there isn’t enough stuff for all that money to buy so prices start to go up.
2022 solution: Un-print money by cashing in government bonds and shredding the cash. As a side effect of less dollars, everyone gets poorer — stocks, bonds, gold, Bitcoin — plus it’s harder to borrow money (higher interest rates). But that’s better than letting prices spiral out of control.
Actually 2022 is kinda the opposite of 2008. Both are gonna suck for the ordinary person though (your financial life becomes difficult through no fault of your own, by the operation of large scale economic forces that even experts barely understand, and you don’t have any direct control over.)
And there are difficult decisions involving tradeoffs, for example if it was up to you, would you raise interest rates if you know that means a couple million people will lose their jobs this year? The catch is if you say “No,” your data wizards and math mavens tell you that in 5 years people will need wheelbarrows of money to buy a loaf of bread and society will basically collapse like it did in the 1930’s.
[1] Some people think we shouldn’t have huge money printing parties, we should have let the insolvent banks collapse in 2008, and we shouldn’t have printed trillions to deal with COVID.
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