More oil, more heating, more inflation: How Joe Biden is ruining the US dollar and the climate

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What do global warming and inflation have in common? When fighting them, what science recommends is stubbornly ignored. US President Joe Biden illustrates this dilemma. But he is not alone.

More oil, more inflation, more climate change

Fighting climate change We cannot go forward with this willful ignorance: we now know that carbon dioxide and methane are the drivers of global warming, and yet last year, according to the Global Energy Monitor, industrially available coal power capacity increased by 48.4 gigawatts worldwide. China alone accounts for about two-thirds of new coal-fired power plants.

Also the United States, They are already the number one oil nation and have increased their oil production even further.

Graphics: Drill, baby, drill! US crude oil production, in barrels per day

The result: The Earth is warming at an unstoppable rate.

The same game when fighting inflation: Economists know very well how currency devaluation occurs: if more banknotes are put into circulation than goods, raw materials and services circulate there, excess liquidity is created.

This excess liquidity leads to price inflation. Y: Weaken currencies. Suddenly you have to pay more than before for oil, steel and bananas on the world market.

And that's exactly what happens: Inflation in the US is currently well short of the 2 percent target, sitting at 3.5 percent. Core inflation (that is, excluding energy and food prices) is running at 3.8 percent, so it is unclear when and if the central bank will be able to cut interest rates this year.

Graphic: US clearly off target. Annual variation in inflation in selected countries, in percentage

As with climate change, these are not anonymous powers, but governments that complain about the emergency and at the same time provoke it. They themselves are the demon they want to expel. On Sunday they ceremoniously gave central banks a mandate to combat inflation by borrowing additional trillions in the capital market midweek, which are then injected into the business cycle.

The fact is: The monetary policy of central banks and the financial policy of governments constantly get in the way.

Example Italy

The regulation of the super bonus allows citizens to cover 110 percent of the costs of improving the energy efficiency of their homes through state tax credits, effectively a huge tax giveaway. the government of Giorgia Meloniwhich had previously criticized the program, has now extended the tax breaks for another year.

Systematic madness. Cost in just four years: more than 160 billion euros.

Italy's public debt ratio That is also why it is 137.3 percent, more than double the upper limit of 60 percent agreed in the Maastricht Treaty.

Example Great Britain

The British national debt It currently represents 100 percent of the gross domestic product. 20 years ago it was about 35 percent. The debt is growing, but the real economy is barely growing. The IMF forecasts GDP growth of 0.5 percent by 2024.

Graphic: The evolution of the national debt: National debt of selected countries, including IMF forecast through 2029, as a percentage of GDP

Example USA

Joe Biden Apparently he wants to buy the rebound and, with it, his electoral victory. The subsidy program implemented globally by his administration is called the Inflation Reduction Act, but it has nothing to do with fighting inflation. On the contrary: the government asks for loans to bring companies from abroad to the United States.

Due to the increase in speed Of the new US debt, $7 trillion in new government bonds hit the market in the first quarter of 2024 alone. The IMF expects the US national debt to rise from the current $34.5 trillion to nearly $45 trillion. dollars in 2028. Let us remember that ten years earlier, in 2014, it was only 18 trillion dollars.

Graphic: Biden: Lending Boom: US national debt including IMF forecasts through 2028, in trillions of US dollars

inflation rates They reflect an expansionary fiscal policy that specifically stimulates the economy and thereby undermines central bank money shortages and economic slowdowns. The United States now has to raise a trillion dollars just to pay interest rates.

Chart: Interest Burden: The Explosion of Costs: The US interest burden since 1947, in trillions of US dollars

No wonder then: U.S. inflation rates have returned to significantly higher levels and, at nearly four percent, are far from the target inflation rate (two percent).

The US budget deficit It represented a “significant risk” to the global economy, the IMF warned. The fund said it expects the United States to post a deficit of 7.1 percent next year, more than three times the average for other advanced economies.

United States, China, but also Great Britain and Italy “We must finally control fundamental imbalances between public revenue and spending,” says a report published Wednesday.

Where is the positive?

Germany, This cannot be ignored at this time; It is the only exception to the international rule. This is where the debt brake of the Basic Law, the debt ruling of the Federal Constitutional Court and a liberal Finance Minister who would rather go under than open the floodgates of money come into play. All this stops the greed of politicians for the moment and, therefore, stops the expansion of the money supply.

However: Again, the similarities between global warming and inflation cannot be overlooked. German efforts to establish a sound fiscal and ecological climate policy are not followed by other nations, but are laughed at and counteracted. Which, conversely, means that the world will not recover from the German character, even by fighting inflation.

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