johaneriksson.se

I am concerned that the counter measures we are seeing around the world, financed by enormous amounts of debts, could be paving the road to the next crisis.

They come from Peter Steinbrück, the social democratic German finance minister. He worries about long term inflation resulting from all the money injected into the system by central banks around the world. That is certainly a possibility. We are not seeing it currently, but it’s not unlikely that inflation will pick up as the economy improves and the banks that have received the newly printed money starts to lend it out.

Additionally there are the government debts. They are accumulating quickly, especially in the U.S., and they will have to be repaid. One option would be increased taxes in the future, and I expect that we will see that — taxes that will themselves be harmful to the economy. However, it is not politically viable to raise taxes high enough to cover the current deficits, which leads us to the other option: the printing press. We will see some of that too, further fueling inflation.

We’re not out of this crisis yet, and we’ll be suffering its effects — especially those created by poor and populist government policies — for quite a while.

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I’ll be off to London for a couple of days, and I doubt I’ll be spending any time blogging while there. Will return in the middle of next week.

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HT: Johan Norberg
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