What Will Surprise Us in 2022 by Charles Hugh Smith for Of Two Minds
What seemed so permanent for 13 long years will be revealed as shifting sand and what seemed so real for 13 long years will be revealed as illusion. Magical thinking isn’t optimism, it is folly.
Predictions are hard, especially about the future, but let’s look at what we already know about 2022. Viewed from Earth orbit, 2022 is Year 14 of extend and pretend and too big to fail, too big to jail and Year 2 of global supply chains break and energy shortages.
The essence of extend and pretend is to substitute income earned from increases in productivity–real prosperity–with debt–a simulation of prosperity –that doesn’t solve the real problems, it simply adds a new and fatal problem: since productivity hasn’t expanded across the spectrum, neither has income or prosperity.
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All that happened over the past 13 years is that debt–money borrowed against future productivity gains and energy consumption–funded illusions of prosperity in all three sectors: households, enterprise and government.
The explosion of debt and interest due on that debt could not occur if interest rates still topped 10% as they did 40 years ago in the early to mid-1980s. We couldn’t add tens of trillions of dollars, yen, yuan and euros in new debt unless interest rates were pushed down to near-zero (for the government, the wealthy and corporations only, of course–debt-serfs still pay 7%, 10%, 15%, 19%, etc.)
This monetary trick was accomplished by making central banks the linchpin of the entire global economy as central banks created “money” out of thin air and used the currency to buy trillions in government and corporate bonds, artificially creating near-infinite demand which then drove the rate of interest into the ground.
Without continuous injections of more “free money” and suppression of interest rates, the market–oh, the horror!– would re-assert its price discovery mechanisms which tied interest rates to risk. The cost of money is causally tied to the perceived security of the currency (i.e. risk) and the interest earned when lending it out (i.e. return or yield).
The $100 USD bill (good old Benjamin) protected from the tropic environment in a plastic bag will have more value than a 100 peso bill in any jungle on the planet because of the general perception that the Benjamin will still have considerably more value tomorrow, next month and even next year than the 100 peso note.
