The global economic machine has taken a battering from the lockdown, and part of the recovery will involve inflation. How well placed are engineers and technologists to ride out the chaos?
Economists used to model their systems like engineers designed refineries, with money flowing around piping, through valves, and in and out of tanks. Its a handy metaphor, but it belongs in its time.
These days it might be better to update the model to our understanding (or lack of it) of quantum physics. Schrdingers cat makes for a good model of the global economy because right now it is both alive and dead at the same time and its going to be a while before we open the box and find the definitive answer.
However you measure the effect of the global lockdown, the economic losses of the last few weeks have been colossal. Sales tax measures suggest a near 50 per cent drop; overall taxes point to 28 per cent, while CO2 emissions show an 18 per cent drop off. So even with a stunningly strong recovery, the net loss to tax revenues in the UK will be hundreds of billions. If the budget is not slashed and the government has promised it wont be those losses will balloon into a bigger and bigger national debt.
The upshot of all this is that the UK, and for that matter pretty much every country on Earth, is going to balloon its public debt to levels that will make a mockery of previous attempts at controlling expenditure so that, for example, the UKs finances next year will look like Italys national debt of last year. All those economic benefits of those years of austerity have gone up in smoke in a few short weeks.
While the UK and Europe have been working flat out to ameliorate their economic woes by exploding their budgets into a series of bailouts, the US has gone all in on a scale only matched by World War Two budgets and it has boosted its money supply at an annualised rate of 100 per cent in the last three months, already banking in an over-30 per cent rise in M1 cash in that time.
As any of us who took GCSE or O-Level Economics will recall, a boost of money supply means a boost in inflation, unless more goods are made to quench the demand triggered by the boosted supply of buying power. Well its a certainty that fewer goods have been made during the lockdown, so a 30 per cent-plus increase in money supply in a few weeks has a South American hyperinflation ring to it. The US is also on the brink of monetising corporate debt the amount that added nine zeros to a German postage stamp in the 1920s. The Germans, if not licking their stamps, are still licking the wounds from that experience, which many blame for the rise of a certain moustachioed landscape painter to power.
Many economists disagree; they say that the money will be stashed just like the cash of the last ten years of QE. The money will be sequestered in ultra-valued bonds, stocks and houses and it wont leak into the hands of the wider population to flush into a buying frenzy that will drive a price rise spiral. That sounds good until you realise that much of the stimulus has gone into the hands of the public in the form of boosted social security payments. The US unemployment payout has been increased by $600 a week, making many people temporarily better off on their sofa watching Netflix or punting stocks on the zero-fee stock trading apps, rather than in their old jobs.
Its a mess, and to my mind it is an inflationary mess, with inflation being the only natural lubricator of the changes ahead for our societies.
Governments cant afford deflation. Recoveries dont happen quickly under deflation. The necessary redistribution of resources that has to now happen doesnt pan out smoothly under deflation. Inflation is the classic path of governance under pressure when crisis strikes, it is the get out of jail free card for rulers since antiquity. However, it is a crazy orthodoxy that inflation is ever so difficult to create, but you can discount that nonsense. If that isnt a huge lie, someone needs to tell Iran, Zimbabwe and Venezuela.
A more nuanced version of the inflation lie is that inflation is caused by the expectation of inflation, and once sparked, its a self-fulfilling loop. That sounds credible until you ask how come they always have banknotes with more zeros to hand as hyperinflation strikes. As the monetarists that killed the inflation of the 1970s tell us: Inflation is always and everywhere a monetary phenomenon.
We are certainly entering into a period of monetary phenomena.
The next few years are going to be grim, but the strategy is the same as in every crisis. Stay employed, be working in the latest thing, buy assets when you see them super cheap.
Engineers and technologists are fortunately at the tip of the value chain and will miss the worse of whats ahead, while Aesops grasshoppers are in for a pretty nasty surprise.
Sign up to the E&T News e-mail to get great stories like this delivered to your inbox every day.
- Combining Quantum Physics and the Theory of Relativity: Sound-Waves From a Quantum Vacuum at the Black Hole Laboratory - SciTechDaily - November 29th, 2020
- Direct Visualization of Quantum Dots Reveals Shape of Quantum Wave Function of the Trapped Electrons - SciTechDaily - November 29th, 2020
- Quantum Mechanics and the Upholding Power of God - National Catholic Register - November 29th, 2020
- Physicists introduced the notion of the quantum magic square - Tech Explorist - November 29th, 2020
- This physicist keeps the science in Marvel's movies accurate (ish) - Wired.co.uk - November 29th, 2020
- Quantum Time Twist Offers a Way to Create Schrdinger's Clock - Scientific American - October 25th, 2020
- Quantum Tunnels Show How Particles Can Break the Speed of Light - Quanta Magazine - October 25th, 2020
- The Importance of Funding Quantum Physics, Even in a Pandemic - Inside Philanthropy - October 25th, 2020
- Quantum Physics and Early Death | Dan Peterson - Patheos - October 25th, 2020
- A New Timekeeping Theory Reconciles Einstein's Relativity and Quantum Clocks - Science Times - October 25th, 2020
- Archer Materials well-aligned with strategic direction of the US in quantum computing - Proactive Investors Australia - October 25th, 2020
- Could Schrdingers cat exist in real life? We propose an experiment to find out - Scroll.in - October 25th, 2020
- Every Thing You Need to Know About Quantum Computers - Analytics Insight - October 25th, 2020
- Physicists clock the fastest possible speed of sound - Live Science - October 25th, 2020
- Post-doctoral Fellow, Department of Physics job with THE UNIVERSITY OF HONG KONG | 230760 - Times Higher Education (THE) - October 25th, 2020
- Diamonds Are a Quantum Scientist's Best Friend: Discovery May Revolutionize the High-Tech Industry - SciTechDaily - October 25th, 2020
- Sumit Das to Deliver 2019-20 A&S Distinguished Professor Lecture on 'Deconstructing Space-Time' - UKNow - October 25th, 2020
- Column: A new era of electric vehicles could be on the way - Gainesville Times - October 25th, 2020
- The TRP turf - The Times of India Blog - October 25th, 2020
- Beyond Homo Sapiens A Slightly Different Roll of the Darwinian Dice (Weekend Feature) - The Daily Galaxy --Great Discoveries Channel - October 25th, 2020
- Quantum and classical computers handle time differently. What does that mean for AI? - The Next Web - September 18th, 2020
- The Fate of Schrdinger's Cat Probably Isn't in The Hands of Gravity, Experiment Finds - ScienceAlert - September 18th, 2020
- Hybrid lightmatter particles offer tantalising new way to control chemistry - Chemistry World - September 18th, 2020
- Scientists Have Shown There's No 'Butterfly Effect' in the Quantum World - VICE - August 19th, 2020
- How Physics Erases The Beginning Of The Universe - Forbes - August 19th, 2020
- Does the Butterfly Effect Exist? Maybe, But Not in the Quantum Realm - Discover Magazine - August 19th, 2020
- Dismantling disciplinary boundaries and decolonizing young India: Decoding the National Educational Policy (20 - The Times of India Blog - August 19th, 2020
- The spread of 'stranger than we can think' - Yahoo Lifestyle - August 19th, 2020
- Raytheon Technologies invests in new transformational STEM high school - PRNewswire - August 19th, 2020
- The Wheel of Time and the Storytelling Problem in the Concept of a Binary - tor.com - August 19th, 2020
- Physicists witness time crystals interacting for the first time ever - New Atlas - August 19th, 2020
- Quantum mechanics is immune to the butterfly effect - The Economist - August 17th, 2020
- Major quantum computational breakthrough is shaking up physics and maths - The Conversation UK - August 17th, 2020
- Physicists watch quantum particles tunnel through solid barriers. Here's what they found. - Space.com - August 17th, 2020
- The science of marketing: taking inspiration from quantum physics - The Drum - August 17th, 2020
- Here's why we need to build a quantum security coalition - World Economic Forum - August 17th, 2020
- The Spread of 'Stranger Than We Can Think' - SFGate - August 17th, 2020
- Nuh Gedik and Pablo Jarillo-Herrero are 2020 Moore Experimental Investigators in Quantum Materials - MIT News - August 17th, 2020
- Students in the news | Announcements - Indiana Gazette - August 17th, 2020
- Indian American Engineer Develops Parachute That Helped Curiosity Land on Mars - India West - August 17th, 2020
- How Quantum Mechanics will Change the Tech Industry - Unite.AI - July 21st, 2020
- Bruce Lee: Inside the mind of the martial arts icon - CNN - July 21st, 2020
- Read Before Pontificating on Quantum Technology - War on the Rocks - July 13th, 2020
- The universe's clock might have bigger ticks than we imagine - Livescience.com - July 13th, 2020
- Testing Einstein's theory of relativity | OUPblog - OUPblog - July 13th, 2020
- Scientists Say This Is the Smallest Unit of Time That Could Exist - lintelligencer - July 13th, 2020
- Study: The Period of the Universe's Clock - lintelligencer - July 13th, 2020
- Book review: From Infinity to Man: The Fundamental Ideas of Kabbalah - The Jerusalem Post - July 8th, 2020
- Book review: Travels with Sushi in the Land of the Mind - The Jerusalem Post - July 8th, 2020
- WATCH: Follow along as this drag queen connects the dots between quantum physics and queer identity - Queerty - July 8th, 2020
- Raytheon Technologies to release second quarter results on July 28, 2020 - PRNewswire - July 8th, 2020
- A Brighter Tomorrow > News > USC Dornsife - USC Dornsife College of Letters, Arts and Sciences - July 8th, 2020
- The logic of the impossible: Moses our rabbi - The Jerusalem Post - July 8th, 2020
- Professor tackles one more mystery about quantum mechanics and times flow - GeekWire - July 5th, 2020
- Quantum fluctuations can jiggle objects on the human scale - MIT News - July 5th, 2020
- Want to Know the Speed of a Complex Nuclear Reaction? - Popular Mechanics - July 5th, 2020
- Try to consciously change the world it might just work - Sentinel & Enterprise - July 5th, 2020
- The Death of Fashion Shows? Not So Fast. | Tim's Take | BoF - The Business of Fashion - July 5th, 2020
- U of T and Hebrew University of Jerusalem launch research and innovation partnership - News@UofT - July 5th, 2020
- Max Planck Created Quantum Theory and Laid a New Foundation for Physics - Interesting Engineering - June 21st, 2020
- Do we need a 'Quantum Generation'? | TheHill - The Hill - June 21st, 2020
- 'Everything was centered around Sara, he was lost': Abhishek Kapoor on Sushant Singh Rajput after 'Kedarnath' - DNA India - June 21st, 2020
- RHOBH: What's with Denise Richards Husband Aaron Phypers? - Screen Rant - June 21st, 2020
- Restructuring cybersecurity with the power of quantum - TechRadar - June 21st, 2020
- In the atmosphere of Mars, a green glow offers scientists hints for future visits - NBCNews.com - June 21st, 2020
- Nano-motor of just 16 atoms runs at the boundary of quantum physics - New Atlas - June 20th, 2020
- Physics - The Period of the Universe's Clock - Physics - June 20th, 2020
- Why Gravity Is Not Like the Other Forces - Quanta Magazine - June 20th, 2020
- Toronto-based Association Quantum appoints Northern Hive PR - Business Up North - June 20th, 2020
- Physicists have proposed a new theory for Bose-Einstein condensates - Tech Explorist - June 20th, 2020
- Intricate Beauty, Quasiperiodic Structures, and the Cascade to Criticality - SciTechDaily - June 20th, 2020
- AI And The Parallel Universe - AI Daily - June 20th, 2020
- The stories a muon could tell - Symmetry magazine - June 20th, 2020
- Physicists Have Reversed Time on The Smallest Scale Using a Quantum Computer - ScienceAlert - June 13th, 2020
- Duckworth on Education: The Feynman Technique - EMSWorld - June 13th, 2020
- Sussex Uni physicist creates the fifth state of matter whilst working from home - The Tab - June 13th, 2020
- Beware of 'Theories of Everything' - Scientific American - June 13th, 2020
- Francesca Vidotto: The Quantum Properties of Space-Time - JSTOR Daily - June 1st, 2020
- What Is the Many-Worlds Theory of Quantum Mechanics? - The Wire - June 1st, 2020
- MIT Student Probing Reality Through Physics, Philosophy and Writing - SciTechDaily - June 1st, 2020