The world’s central banks are scrambling to tackle runaway inflation, but the solution may just be to ramp up fossil fuel production
. The year 2020 is known for Covid-19 related shutdowns and flight cancellations, but the indirect effect was to reduce energy consumption by less travel and by broken supply lines leading to unavailable goods. Governments tried to get their own economies growing by various techniques, including spending more than the tax revenue they took in, leading to a need for more government debt, and by Quantitative Easing, acting to hold down interest rates.
If this combination of events occurs, deflation is a likely outcome because banks and pension funds are likely to fail. If, somehow, local governments are able to bail out banks and pension funds, then there is a substantial likelihood of local hyperinflation. In such a case, people will have huge quantities of money, but practically nothing available to buy. In either case, the world economy will shrink because of inadequate energy supply.Most people have a “normalcy bias.
. Thus, on average, people must become poorer. Most individual citizens, as well as most governments, will not be happy about this situation. There is no possibility of ever transitioning to a system that operates only on intermittent electricity with the population that Europe has today, or that the world has today. Wind turbines and solar panels are built and maintained using fossil fuel energy. Transmission lines cannot be maintained using intermittent electricity alone.Basically, Europe must use very much less fossil fuel energy, for the long term.
in the lifestyles to which they have become accustomed. One issue is the huge amount and cost of healthcare. Another is the cost of separate residences. These costs can be reduced if the elderly can be persuaded to move in with family members, as was done in the past. Pension programs worldwide are running into financial difficulty now, with interest rates rising. Countries with large elderly populations are likely to be especially affected.
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