The current economic debate may become less noisy if we place it within the global context full of uncertainties in which we live.
In the current post-Covid phase, the whole world is suffering from high levels of public debt, inflation and interest rates, all at the same time.
There is still controversy about what generated this scenario.
One of the suspects is government spending during the pandemic. In his last live as president last Friday (19), he recalled that around 20% of the world’s GDP was spent to combat Covid-19. This money may have heated up the economy, increased demand and helped generate inflation and debt.
Another suspect is the disorganization of production chains during the pandemic. With restrictions on movement and circulation, the production of many goods may have been hampered, reducing supply and, thus, increasing prices.
In this scenario, many economists – and the IMF – have asked governments around the world to hold back on public spending. It would be a way to cool down the economy and combat inflation, without having to raise interest rates even further. After all, high debt that grows at a high interest rate can get out of control.
While this difficult operation was attempted in several countries (including here), the Americans elected . If Trump implements his protectionist proposals, inflation should rise, forcing the American central bank to raise interest rates. If that happens, we will end up having to do the same.
This world of expensive food and high interest rates has been electing opposition governments around the world in recent years. Germany’s government has just fallen, France’s prime minister has too, Canada’s is almost gone. The left lost in Argentina as a situation and won in Uruguay as an opposition. Trump lost one election as government and won the next as opposition. In the post-Covid period, Lula won one as opposition and, it appears, will contest another as government.
This disadvantage of the incumbent is not normal. In general, those who run for re-election come out ahead. You can use the machine to your advantage and announce popular measures during the campaign.
It seems that governing between Covid and Trump is difficult around the world.
This Satanic mess that is today’s world helps us understand why it is important for the Lula government to support Lula’s fiscal effort. Under the shock of R$6, . At least the Judiciary could.
No, it’s not because Lula is burning money: this year’s deficit will be smaller than what the market predicted in January. But the growth was much greater than expected. The boost that Lula gave to the economy with public spending generated more growth than public spending usually generates.
So far, wonderful, but the booming economy makes it difficult to lower interest rates and here, as in the rest of the world, debt is already high. As we already said, .
The world is particularly bad, with a tendency to get worse. It’s one of those situations with little margin for error and little clarity about where the right thing lies. It would be best to move cautiously.
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