| Also I suppose to add a little more depth to this explanation a lot of this is related to actions coming from the US central bank. As the Fed raises rates in the US it makes the dollar a more attractive place to put money. This devalues other currencies against the dollar. Because the dollar is the reserve currency a lot of stuff countries like the UK imports is denominated in dollars (oil, food, etc). This means the US actually increases inflation pressures for other countries when they raise their domestic interest rates. This forces other central banks to raise interest rates in line with the US simply to protect their currencies from the inflationary effects of currency devaluation. Unfortunately right now Europe can't really afford to do this with an ongoing energy crisis, but we have no choice. The US is literally whacking their allies around the head with the US dollar. But then from the US perspective what choice do they have? The Fed already has little credibility and to allow inflation to run hot in the US to protect Europe from currency devaluation would be equally risky and unpopular. We're in very tricky times. We've kicked the can down the road for so long that it's now catching up. We no longer have any good options left. It's all just trade-offs from here. Many including myself did try to warn this was always the risk of such a reckless response to Covid, but I suppose it's too late for that now. |
It's still hard to fully discuss the overreaction to Covid in many forums without getting shouted down for wanting to kill Grandma, but there are people out there who don't seem to fully grasp that actions taken to try and solve problems can have drastically negative consequences. You can't just spend money you don't have indefinitely without paying the piper and screwing yourself down the road.
Personally, I fear that the emotional reaction to Russia/Ukraine is turning the same way, perhaps with far more dangerous long-term consequences.