And with finance, of course, comes the devil’s due: interest. The idea of actually fully owning a home or a car is fantasy for most people - even in rich nations.īecause incomes have been stagnant for decades now, broadly speaking, every last bit of life is financed. The truth is worse still: Americans are ultra highly indebted, living off a cycle of debt, from mortgages to credit cards to student loans to car payments, precisely because they have never earned enough from their labour to be able to afford much of anything outright. Some 60–80% of Americans say that they live paycheck to paycheck, and the real numbers are likely higher - because nobody likes to admit that. Let’s take those questions one by one, starting with: is the cure worse than the disease? What’s going to happen as interest rates rise? Nothing much good is - because most people, even in rich economies, now live at the edge. One, what is the fundamental problem causing prices to skyrocket around the world, and two, is this kind of brute force, blunt, broad, hammer-blow after hammer-blow of a cure worse than the disease? After all, you can also solve the problem of a patient’s cancer by…killing them. What they hope is that by taking the economy right to the edge of recession, they can stop the inflationary wave - even if they can’t solve the problem at the roots, they can beat it into submission.īut that raises two questions. And as a result, central banks are just hammering economies with rising rates - even, though, crucially, they know it’s probably not going to work. Every day, week, month, prices are still rising. Yes, the acceleration has slowed a little bit - but in what’s currently the world’s strongest economy, and that’s not saying much, America, it’s still at about 8.5%. But that has proven not to be the case - and the fact that inflation was skyrocketing around the world, even, especially in countries that didn’t have any Covid relief, because they were too poor, should have been a warning sign that the Covid-theory-of-inflation was wrong. Why is that? For a short period, it was thought that this period of inflation would be a “burst” - a fleeting pulse upwards, driven by Covid relief, mainly. But even they know that it’s unlikely to work. Central banks are desperately raising rates - to try and combat inflation. Well, think about what’s happening to the world economy right now. This is the kind of place that we’re headed. If all that flashed through your mind, you’re right.

Because that is what faltering economies do - they tend to have profound social and cultural consequences, too. A general feeling not just of malaise - but that the world is against you. Maybe people losing their jobs and homes and livelihoods. When I say “financial crisis,” what comes to mind? Bank failures, probably, or stock market crashes. Let me begin with the small picture, and then we’ll zoom out. Those changes are now upon us, and, well… In the last few months, I’ve been writing about how the economy is going to change, as the mega-scale impacts of climate change begin to be felt. We are now headed directly into the towering walls of a Category Five Hurricane. The short answer to that question is: yes.

What’s going on here? Are we headed for another financial crisis? To add to a world already beset by political, social, and ecological crises. In the world of economics, accustomed to aeronautical metaphors, the turbulence only seems to be rapidly juddering. Currencies are struggling, stock markets are tumbling, inflation’s still rising, incomes are flat or falling. Around the world, ominous stirrings are beginning to rumble.

Elizabeth warren zoom stock