During the summer months, global markets experienced a significant shift away from post-pandemic growth, which had been driven by inflationary monetary policies and unprecedented stimulus packages. This momentum was further fueled in 2023 by speculative investments in eight AI-related technology stocks, and aided by easing inflationary pressures as the global economy adapted to new post-war logistics frameworks. Historically, the actions of central banks have proven counterproductive, exacerbating both inflation and the stagnation that is now beginning.
The first warning signs, noticed by economists six months ago, came in the form of slowing manufacturing data and rapidly declining inflation, signaling a sharp global slowdown in business activity. This trend was initially more pronounced in countries dependent on agricultural and manufacturing imports, and eventually became evident in developed economies, particularly the European Union. By the summer, even local bureaucrats recognized the issue, yet they clung to “data dependency” without taking decisive action. As a result, we are now, in the fall, entering a global era of stagnation.
In regulated economies, attempts were made to re-stimulate markets, but these efforts are likely to have only temporary effects. With globalization no longer serving as the engine of growth, economies must now restructure on the fly, seeking new avenues for expansion through technological advancements and workforce reductions. However, relying solely on supply-side economic expansion risks social instability. As corporations focus on cost-cutting, governments will be forced to print more money to subsidize rising unemployment and social unrest. The only long-term solution is radical economic decentralization, balancing free-market competition with universal basic income (UBI) and communal ownership of key assets and corporations.
Furthermore.
It is a well-known that the Phillips curve has not been “observed” since roughly 2000. Why? My proposition is that this is due to growing government pressure on private businesses to increase non-productive expenses and to keep employment artificially high due to the unacceptable level of growing social tensions for the ruling class.
The Phillips curve (named after economist Phillips in 1950s) suggests that there’s a trade-off between inflation and unemployment. According to this theory, if a country has low unemployment, it will likely have higher inflation, and if it has high unemployment, it will likely have lower inflation. This is because when there’s high demand for labor (low unemployment), workers can push for higher wages, leading to higher prices (inflation). Conversely, when there’s low demand for labor (high unemployment), workers are less likely to push for wage increases, leading to lower prices (deflation).
In fact, this curve stopped functioning because capitalism stopped working. “Thanks” to elites politicians, we are transitioning into a new economic regime that might be called “simulated markets.” The elites, who hold more than 80% of all assets, are not interested in competition, as it could lead to their losing all their holdings to newer and smarter generations.
To cover up this “strategy”, elites have introduced concepts like a “green economy”, ESG, and “progressive economics”. However, none of this will change the fact that, faced with global stagnation, we need the economy to grow, which requires cheaper and more abundant labor. While we currently have low inflation, it, however, is accompanied by record-high employment, which leaves no room for businesses (especially SMEs) to renegotiate and lower salaries. This will only lead to the next round of inflation, forcing the government to pressure businesses to raise salaries, and so on.
The situation might improve if all major countries open their borders to mass migration from the underdeveloped world, but, as we all know, that’s unacceptable to the majority of the “golden billion.” As a result, we are facing a very long period of artificially induced global stagnation, which can only be ended by complete decentralization of economies and the formation of new global regions where “laissez-fair” capitalism can return. All individuals who cannot compete might subsist on UBI or relocate to other regions of the world where competition is less intense and then live happy-ever-after under various “camouflaged socialism” regimes.
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What’s Up With Markets? was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.