A new debt crisis looks unavoidable. There is practically no interest in fiscal reforms across Europe, leaving the continent vulnerable to a destructive downward spiral of rising interest rates and structural budget deficits.
The numbers for the first quarter of this year were released by the Bureau of Economic Analysis showing a 30%-percent rise in revenue for the U.S. federal government over the pre-pandemic first quarter of 2019.
While the forecast for inflation-adjusted growth has been downgraded, predictions of inflation remain elevated. A preliminary estimate suggests that euro-zone inflation reached 7.5% in April. Despite this, inflation in the currency area “is projected at 6.1% in 2022, before falling to 2.7% in 2023.”
In practice, the merger between mainstream Keynesian economics and welfare-state policy was exactly what drove most of Europe into its current state of stagnation.
While the U.S. has its economic problems, the runaway government debt being an ominous example, its unending reliance on domestic spending for domestic prosperity is a winning recipe over time.
