USA forced prices to rise around the world, by Olga Samofalova for VZGLYAD, 27.07.2021.
The USA is to blame for the acceleration of world inflation. This statement was made by Russian President Vladimir Putin. Washington put the dollar-printing press at full capacity during the pandemic to save the economy. As a result, the whole world is now reaping the benefits of the United States' unprecedented assistance to its citizens.
Vladimir Putin declared America's fault in accelerating global inflation. “In the US, inflation has exceeded five percent, although, in my opinion, their target is somewhere in the region of two. And for two years in a row they have been making up the budget with a 15 percent deficit. This deficit is extinguished at the expense of what? Through emission. Hence inflation. Of course, this is reflected entirely and completely on the entire world economy, bearing in mind the importance of the American (economy) for the whole world and the importance of the dollar as the most demanded reserve currency, "Russian President Vladimir Putin said at a meeting on economic issues.
According to Putin, inflation in Russia "albeit not so significant, but still goes beyond our targets." He called on the government to take coordinated action in response to rising prices.
Before the 2019 pandemic, inflation was the second lowest in the history of modern Russia. The absolute minimum was recorded in 2017. In the 2020 pandemic year, inflation reached 4.91% after 3.04% in 2019. This year, the Central Bank's forecast is 4.7-5.2%, but in 2022 it should drop to 4-4.5%, and then stay at the target level of 4%.
Actually, problems with inflation acceleration began last year in many countries. And the main culprit is indeed the United States.
“The United States exports inflation to other countries - it dumps the growth of inflationary tension to developing countries, otherwise they would have inflation much higher than 5%. This is one of the consequences of the global economy,
when countries depend on each other, on the policies of external regulators and on the amount of money printed - dollars and euros, ”says Artem Deev, head of analytical department at AMarkets.
For example, there was no such situation with inflation in the USSR. Many people did not even think about it, because the same utility tariffs have not changed for decades. “This happened for the simple reason that the Soviet economy was not closely tied to the dollar, at least not to the extent that it is now. Currently, our country is inscribed in the global economy, and everything that happens in the United States or Europe affects the ruble exchange rate, inflation rate, government balance, etc., ”Deev says.
How does the export of inflation from the US to other countries, including Russia, take place? There is a dollar printing press in the USA. Therefore, when the crisis came due to a lockdown into a pandemic, the American authorities decided to distribute money to the right and left to the population in order to keep the economy afloat. Moreover, this is easy to do - just run the printing press at full capacity. Since the beginning of the pandemic, the United States has spent $ 6 trillion to $ 9 trillion on anti-crisis measures. And when Joe Biden came to power, they spent another $ 2 trillion on a new social stimulus package.
“Even before 2014, the head of the Fed Ben Bernanke, nicknamed the Helicopter pilot, joked that inflation is very low, but you can always start throwing money from a helicopter to cause it to rise. In 2020, measures of direct financial support of the population in amounts sometimes exceeding the salary of the average American became the implementation of Bernanke's idea of “scattering” money, ”says the head of the Department of Financial Markets of the PRUE. Plekhanov Konstantin Ordov.
Of course, the printing press is not the only way to find money to provide support to the population and businesses in times of crisis. Another way is to increase budget revenues and borrow on the global market. But the last two ways are problematic for the United States. In a crisis, the budget is already hard, and here there is also an incredible increase in expenses. Unsurprisingly, in 2020, the US budget deficit reached 16.1%, or $ 3.1 trillion. This is the maximum deficit since 1945, that is, the year the Second World War ended.
The state debt situation in the United States is generally stalemate. The country once again found itself on the verge of default. The US national debt by the end of March 2021 reached $ 28 trillion, or 101% of GDP. This means that the national debt has exceeded the size of the US economy, which, by the way, is the world's largest economy. A similar thing happened once in the history of the United States - after the Second World War, in 1946, the ratio was 106%. A repetition was expected only after ten years, and the United States has borrowed so much now. Now the country is on the verge of default, because by law it is no longer possible to borrow. However, no one believes in the reality of default - the Americans, as always, will raise the ceiling on borrowings with a new stroke of the pen, and everyone in the world will breathe freely.
That is why the American authorities are so active and took up the printing press. Moreover, they have an excellent opportunity to export some of the inflation outside their own country. Although, of course, within the United States, inflation is not the target 2%, but 5%, but this is nothing compared to the inflation that could have been if it were not possible to export it.
What is inflation export? “The mechanism is that the more the US and other developed countries print money, and their currencies are included in the list of reserve currencies of the world, the lower the purchasing power of other currencies, such as the ruble. Emerging markets suffer more than developed ones, because inflation is growing in large volumes, imports are becoming more expensive, ”says Deev.
When the United States printed a lot of dollars that were not provided with the production of real goods, inflation in the country increased, and the prices for goods rose. They sell their products at higher prices. Printed dollars are spreading around the world through stock exchanges, through American purchases of imported goods, and so on.
“Indirectly, the printing of money and, as a result, the inflation of bubbles in the market for oil, metals, grains and other goods leads to higher prices in all countries, including the United States itself,” says Maxim Shein, chief investment strategist at BCS World of Investments. ...
When commodity prices rise, for example, it becomes much more profitable for Russian exporters of oil, metal and grain to export their products. This creates a shortage of goods within the country and leads to a market price increase. Hence the attempts of the Russian authorities to restrain the rise in prices by introducing temporary restrictions on the export of one or another product. Of course, sometimes point factors are also superimposed, which lead to a sharp rise in prices for specific products. For example, these are weather factors - crop failure.
“In addition, if imported goods act as raw materials or components for the production of domestic products, inflation in world markets leads to an increase in production costs and, ultimately, the price of products. It is extremely difficult to fight the export of inflation - as long-term measures, localization of production is being implemented, increasing the competitiveness of domestic products, ”says the associate professor of the Department of Economic Theory of the PRUE. Plekhanov, Ph.D. Alexander Krasilnikov.
“Even looking inflation in the eye, the US government continues to play the fool by maintaining budget deficits and unsecured emissions. To live within one's means is a great responsibility, which, of course, does not seduce the overseas revelers who have gone on a spree. But this cannot and will not last long. The only frightening thing is that the whole world is in the same financial boat, so a financial "hangover" threatens everyone, and it is worth preparing for this right now, "concludes Ordov.
“They will not stop printing money, since the United States and other countries have no other ways to restore the economy. Inflation on a global scale will continue to grow", says Deev. Nobody can do anything about it. Because the current global economic system is largely tied to the dollar. “Roughly speaking, from the moment the United States turned the dollar into its main commodity, states became dependent on the financial and economic policies of the States. And the United States simply has an exceptional opportunity to develop its economy by selling its debt obligations to the whole world. States live in debt to the whole world, knowing that they will never pay off. And all existing problems, including inflationary ones, are solved at the expense of others, including Russia, ”Deev says.
Therefore, there is talk about the US monopoly and the need to destroy it. The share of the dollar in world trade and in world reserves is declining, but this is happening extremely slowly. Abrupt steps are too dangerous for everyone. Russia, due to sanctions pressure, hastened the process of abandoning the dollar: Moscow has already refused to lend to the United States and has abandoned the dollar in its reserves.