Thread by @ExCllrRedmond

Govts, including our own, borrowed massively during covid. They continue to borrow massively for a myriad of political projects on top of enormous increases in spending in health, housing and every govt dept. They’re chasing inflation with public sector pay rises.

The problem with growing the State to such massive levels is that it’s unsustainable if you can’t keep borrowing. We have put this spending on the credit card. We need the internet rate on that credit card to stay at its historically low levels. But then Inflation arrived….

The role of central banks, their literal purpose, has always been to control inflation. The notion of keeping inflation at 2% became the ubiquitous mission of global CBs. It used to be a big problem. But we haven’t had to deal with it in 40 years so CBs sought another mission.

They sought to become currency actors, economic activity actors, social justice actors (!).

And then Mr. Inflation came roaring back. Globally we have printed and loaned more money in the last two years than in the rest of history combined. Yes, you read that right.

When you print tons and tons of money (digitally these days of course), and loan it out at next to 0%, guess what happens? You destroy its value. It’s an old story and wasn’t a surprise despite what you hear. Inflation was inevitable and desired. It’s just gotten off it’s leash.

So now, central banks have to get back to what they were designed to do; Control Inflation. They do that by increasing interest rates and squeezing money supply (in the EU that means killing bond buying etc). This will create a recession because that’s the way to beat Inflation.

And that brings us back to my first tweet about the hyper borrowing and the hyper spending that started in Covid and has continued woth the insane global policy of #BuildBackBetter

Keynesianism always ends the same way: hyperinflation and recession.

Ireland’s debt load is obscene. It’s grotesque in comparison with our GDP, GNI* or any other measure.

And the rest of the PIIGS are same. Remember them?

Europe’s Debt Crisis 2 is coming.

telegraph.co.uk/business/2022/…