The world is weird right now.
Here in Sydney, we exited COVID lockdown thanks to a sudden spurt in vaccinations and a decision to live with the virus after 18 months, thinking it could be kept out.
Lockdown is hard for folk used to freedoms. Everyone is over it, and yet the exit vibe felt more cautious than euphoric while fronting to the GP for a double jab.
Then we lost our state premier, Gladys, forced to resign because the ICAC had to investigate her involvement in dodgy deals by a disgraced Liberal MP, her secret boyfriend at the time. That is a shame because she was one of the few pollies holding it together. The federal government ministers, and especially the PM, are just racing to cover their arses.
Now La Nina has dumped weather on us for weeks. We try to be upbeat and say that the cold and wet is better than wildfire. It is, but even that sounds hollow.
Meanwhile, in Australia…
The 2021-22 Budget committed an additional $41 billion in direct economic support, bringing total support since the beginning of the pandemic to $291 billion as of May 2021.The Treasury, Australian Government
Such large numbers are hard to fathom, so for comparison government revenue was $472.4 billion in 2020-21 (24.3 per cent of GDP) and in 2021–22, Government revenue is forecast to be at its lowest level as a share of the economy since 2011–12. Submarines notwithstanding, they are hard up for cash.
COVID economic support has cost the government nearly one year’s revenue.
This is way above the initial fiscal commitment and goes onto the books as debt.
Here is a graph of the government debt loads for OECD countries in 2020, essentially the pre-COVID numbers from the OECD website
Australia is a mid-ranking OECD country for debt relative to GDP. However, the debt load rising steadily since 2007, has spiked with this extra expenditure.
Alloporus has already mentioned that the global debt load has climbed to nearly $240 trillion, a number so big that it cannot fit on the screen of a standard calculator. Australia has made its modest contribution.
Gran always lived by thrift, a frugal approach that ensured there was no debt. Before people had access to credit there was no option but to live within means.
Then the economists told us that
the two primary causes of hyperinflation are (1) an increase in money supply not supported by economic growth, which increases inflation, and (2) a demand-pull inflation, in which demand outstrips supply. These two causes are clearly linked since both overload the demand side of the supply/demand equation.Investopedia
Not being an economist my naive observation is that borrowing money or printing it to maintain the economy during a crisis that kicks economic growth in the nuts, fits primary cause number one.
But not to worry because…
“In the U.S., the central bank does not pay debt with the money it creates. Rather, it lends money at its targeted interest rate and the private sector employs that capital more productively. The money created is paid back, which is a crucial reason this monetary policy doesn’t produce hyperinflation.”Economist Asher Rogovy
Truly, the world is weird right now.