Supply contraction

2008 to 2021 saw an unprecedented amount of credit expansion by the monetary authorities. When it finally resulted in an intolerable level of inflation they started draining money and credit from the system. Those policies will have a “demand side” impact that will help to reduce inflation, but there are some “supply side” factors that they can’t control. Many of the latter were related to the pandemic lock-downs, but others are more structural and thus will be persisting:

. demographics: the workforce is shrinking as boomers retire and fertility rates decline

. de-globalization: beyond an optimal point, the distances and complexities associated with globalization reduce rather than increase profitably; there is a sense that things got to that point during the last decade and so an era of de-globalization has begun

. falling productivity: facing precarity, inequity, and pessimism about the future, there is a malaise among the populace that results in alienation from “the system,” disinterest, and a work-affecting lethargy that reduces productivity