Recently, I have been trying to comprehend the changes in the economic situation from a long-term cyclical perspective. That would help us make money, both active income, such as our jobs, and passive income, like investments.
That made me wonder whether inflation—the general rise in prices—will settle down soon or not. Let’s talk about it.
How to predict the future change
Sometimes, we want to comprehend the current situation logically from a broader, historical perspective. There are many strange events and people’s behaviors, especially in the economy.
One typical, strange thing for me was the behavior of the U.S. president. He suddenly built walls at the border and began to exclude immigrants. In addition, he imposed high tariffs—taxes on imported goods—and began withdrawing support from around the world. Perhaps you know these events from the news.
It looked incoherent to me. The news on TV that my parents always watch portrayed him as a childish dictator whose next actions are unpredictable.
However, there should be meaning from a long-term perspective.
Recently, I finally became able to explain it rationally. It told me that governments cannot change the economic cycles in the long term. In other words, they seem unable to stop inflation. Today, I will explain why.
The rationality of the current U.S. president
In my opinion, the governments cannot prevent inflation in the long term.
The rationality behind the actions of the current U.S. president describes that point.
His principle was simple: he was trying to improve the government’s financial situation. As a former manager of large-scale real estate, he is well-versed in finance.
In business, the principles for improving finances are simple: separate unprofitable divisions and focus on profitable ones.
However, there is one difference between business and governance: the government cannot cut off unprofitable industries. Even the president cannot drive all citizens in those industries out of the U.S.
That is why the U.S. president started a block economy. He judged that those industries don’t have to grow. Tariffs and stricter immigration controls are for that purpose. Unprofitable divisions don’t need a large workforce. That will improve the government’s finances.
On the other hand, he is promoting investment in profitable industries. He is also urging investment from the governments of other countries. Since those investments are in growth industries in the U.S., they will benefit investors. Although there are no guarantees in the outcome of investing, his proposal is not irrational from a business perspective.
In other words, his actions make sense. That would be why he is so confident.
Unavoidable inflation
However, that illustrates that inflation is inevitable worldwide.
In my opinion, the current U.S. president is one of the most skilled businessmen in large-scale finance. In addition, he is using every possible authority to achieve financial stabilization to the extent that he is called a dictator.
Even so, there is no sign that the U.S. government’s finances will improve. It means that no one can achieve it.
The U.S. government may have no choice but to continue printing significant amounts of money and utilizing it. The U.S. is the country with the largest economy.
That tells us that governments cannot change the economic cycles in the long term.
The scale of the government is far smaller compared to the size of the economy, even the U.S. government. The money created over the past few decades is circulating around the world. The scale exceeds the government’s capacity to manage effectively.
In other words, we have to focus on long-term economic cycles rather than government trends. The phase of the economic cycle determines the reaction of the governments, not vice versa.
History repeats in different forms. That logic will reduce your confusion about the economy and the reaction of the governments.
Conclusion
That is my logical explanation of the current economy.
The governments seem unable to prevent inflation in the long term.
The rationality behind the actions of the current U.S. president explains that point.
That logic might allow you to comprehend the current situation and help you predict future changes.
Thank you for reading this article. I hope to see you in the next one.
