Paradox of our time: On the one hand, so many people see their individual (consumer) needs as the most important good, as absolutely worth protecting. Exaggerated maxim: What I want is sacred - everything starts from the individual. On the other hand, for just as many people, the individual seems very small when it comes to changing something in the world. Exaggerated maxim: I wish a lot of things were different in the world, but I alone can’t change anything. How does that fit together?
Perhaps we should think again about inflation. This is important for the big and expensive projects ahead of us: zero emissions, public transport, hydrogen-based production and so on. For years, the money supply rose rapidly, but inflation in Europe and the US remained in the low single digits. Now the supply of certain goods is falling – and only now inflation is rising. Because production in China is down due to COVID-19, because supply chains are disrupted, because gas is scarce in Europe, because power plants in France are down and therefore less electricity production is on the grid.
Only now is inflation rising rapidly. Isn’t that empirical evidence that inflation does not depend on the money supply? It appears to me that inflation is rather caused by the lack of goods and services people and companies want to buy. In other words, it is not too much money that leads to inflation, but too few goods for the money.
If this is true, that is good news for the big and expensive projects ahead of us. First Priority should be to provide the necessary resources and labor for sensible large-scale projects such as the energy transition. If the goods are there, then financing is no problem regarding inflation. Not the other way round!
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