The United States, and the rest of the world, are facing three major problems at the present time: the War in Ukraine, Global Warming, and Inflation. I have written about all of these problems separately in the recent past, see here, here, and here.
These three problems are, in fact, highly interrelated. Consider:
- The Ukraine War. Ukraine wants to be free and independent. Russia invaded Ukraine to keep it in its own orbit. The brave Ukrainians are willing to fight and die to expel the Russian forces. The U.S. and its European allies are helping Ukraine defend itself by supplying military armaments. This should be continued as long as Ukraine is willing to resist. But Europe is dependent on Russian gas and Russia is now threatening to cut off gas exports to Europe. This puts huge pressure on Europe to find alternative sources of energy.
- Global Warming. Global warming is real and serious. But we need to keep things in perspective. Yes, the average world temperature has risen 2 degrees Fahrenheit since pre-industrial times. Although half a million people die each year from heat, 4.5 million perish each year from cold. Cheap and reliable energy is needed to afford air conditioning in the summer and heat in the winter.
Rising fuel prices are also making food more expensive. Low-cost synthetic fertilizer, made from natural gas, is one of the greatest technologies mankind has invented for feeding the world.
The world gets almost 80% of its energy from fossil fuels. Instead of sending energy prices sky-high by trying to force a premature transition to renewables, we should focus on funding research to decarbonize traditional energy sources, such as carbon capture and storage, that are affordable and reliable.
- The annual inflation rate has now reached 9.1% and the Federal Reserve has just raised interest rates again by .75 percent, for a total increase this year of 2.25%, not nearly as much as the 7% increase in inflation during the past year. Such a modest plan for fighting inflation is based on the optimistic outlook that Pandemic- related supply problems will quickly resolve themselves.
But focusing on supply issues only does not take into account the enormous buildup in national debt as well as Fed bond holdings (quantitative easing) in the past decade. This has created an enormous amount of money sloshing around in the economy which has caused way too much artificial stimulation.
A more aggressive Federal Reserve, aided with fiscal restraint by Congress, will get our inflation rate back down to a reasonable level more quickly and with less pain in the long run.
Conclusion. The U.S. is handling the Ukraine War as well as it can. But the war is putting Europe in a bind because Russia is threatening its energy supplies. Trying to make a transition to clean energy too quickly is causing a lot of unnecessary pain and suffering around the world. On the other hand, inflation is a more urgent problem than is recognized by our national leaders. The Federal Reserve and Congress should be taking it much more seriously than they have so far.