As more countries copy the Federal Reserve’s monetary policy without the global demand of the US dollar, financing trade and fiscal deficits printing a weakening currency, nations become more dependent on the US dollar.

Neither domestic nor international citizens demand local currency, and governments continue to build large fiscal and trade imbalances believing the magic money tree will solve everything. However, as confidence in their domestic currency collapses, global US dollar-denominated debt soars because very few investors want local currency risk and central banks need to build US dollar reserves to cushion the monetary debasement blow.

Most emerging and developed market currencies have devalued significantly relative to the United States dollar in 2021 despite the Federal Reserve’s aggressive monetary policy. Furthermore, emerging economies that have benefitted from rising commodities prices have also seen their currencies weaken despite strong exports. As such, inflation in developing economies is much higher than the already elevated figures posted in the United States and the Eurozone.

The main reason behind this is a global currency debasement problem that is making citizens poorer.

United States consumer confidence has plummeted to a decade-low in November. The University of Michigan’s consumer sentiment index fell to 66.8 in November, down sharply from the October figure of 71.7 and well below consensus forecasts of 72.4. Inflation is hurting consumers and the impact on daily purchases is more severe than what the Federal Reserve and consensus estimates may want to believe.

The Misery Index, which adds inflation and unemployment, is at 10.8%, the highest reading in a decade if we exclude the peak of Covid-19 lockdowns, when the Misery Index reached 15.13%. These are Carter-era levels for the Misery Index and stagflation alert signs.

High oil prices are a symptom of economic and monetary imbalances, not just a consequence of OPEC decisions. Throughout history, we have seen how OPEC cuts have done little to elevate prices when diversification and technology added to rising efficiency.

Likewise, OPEC output increases do not necessarily mean lower prices, let alone reasonable ones. OPEC helps but does not solve price issues, even if they would probably like to.

The problem in the oil market has been created by years of massive capital misallocation and underinvestment in energy created by extremely loose monetary policies directed by governments that have penalised capital expenditure on fossil fuels for ideological reasons.