Europe Sets Fire To Its Own Economy
Note 2: For those of you who are so inclined, please do me the favour and share this article on social media, especially Twitter, where I currently am suspended.
I received a panicked call from my mother last week because she could not find a rental car here in this part of Europe for a price anywhere near what they got back in 2018, just before COVID-19 struck. Doing my filial duty, I managed to find a long-term rental roughly twice as expensive as what my parents paid back then. This price was well under what she managed to find, so I reserved it and paid for it. What my mother just experienced was an inflationary shock, something that she should have expected in light of the fact that North America is already experiencing this very same thing.
Three weeks ago I took an American friend to the city of Mostar in Hercegovina so that he could see a very unique place, half-Western, half-Turkish. Our gracious host opened up the conversation we had with him with the subject of inflation, and how best to hedge against it. One would expect that our host would suggest places for my American friend to visit to best experience the amazing setting in which we found ourselves. Instead, it was talk about inflation. So it goes.
People are cursing at gas stations, at stores that sell everyday personal items like shampoos and tampons. Inflation is what is on everyone’s mind, and it pre-dates the Russian invasion of Ukraine. A combination of COVID-related supply chain crunches and the USA’s decision to crank up the printing press has led to this present state of affairs. The War in Ukraine has served to only pour more fuel on the fire.
Inflation is the assassin of the middle class. It brutally punishes savers and negatively impacts future financial planning. One would naturally assume that politicians would drop everything that they were doing to combat it, as inflation takes a scythe to any sitting government.
Oddly, this is not happening in Europe at present. Instead, European leaders are acting like people on social media whenever “The Current Thing” dominates the conversation, happily and loudly adopting the “correct position” regarding the War in Ukraine to placate their American rulers, despite how it is already negatively affecting the economies of their own countries. (For the sake of clarity, one cannot include the countries along Russia’s western borders, as they have legitimate security concerns based in history, both long ago and not too distant. One must also bring up the fact that Viktor Orban is an exception to this overall case of slavish devotion to the USA, putting the interests of his own people, particularly economic ones, above US foreign policy objectives.)
The following two graphs will succinctly describe the current situation in Europe regarding inflation:
These do not paint a very rosy picture, do they? Europe already pays quite the premium for energy, leading to the prospect that next winter many will have to choose between heating their apartments and eating as many meals as they do now.