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Economic Inflation to Trigger Social Conflagration


Societal Pressure Cooker


Americans’ psychological immune system has been deleteriously degraded with never-ending, elevated stress after two years of lockdowns and restrictive movements. The nightmare continues in a different form seamlessly after the easement of pandemic restrictions as re-openings and greater freedom of movement have been greeted with a sudden NASA-trajectory of hyper-inflation.


Exploding commercial and personal debt has resulted in more business closures, more layoffs, more unemployed and more under-employed citizens who must purchase basic essentials with credit cards that are approaching their credit limits.


The ever-shrinking middle class with good paying jobs, solid savings and reasonable living expenses, have fallen into poverty or who are teetering on the cusp of bankruptcy while the underclass is further burdened by subprime loans with rising usuary rates. In sum, the citizenry’s desperate efforts are not to maintain their pre-pandemic lifestyle rather to survive and prevent homelessness.


The Fed’s policy efforts in utilizing all the tools in their toolkit are failing to arrest this economic downfall fueled by hyper-inflation. It’s a road to perdition with no off ramps or even air bags for the economy. Bad things happen when things break - like the system.


For this reason, the perfect toxic brew is in place to trigger a social powder keg this summer going forward, an economic sinkhole that will make even law abiding but psychologically and financially exasperated citizenry far more tempted to engage in desperate activities. Even Mother Nature is getting in on the “action” such as blowtorch summer temperatures, increased storm activity and water shortages serve as accelerants for violent encounters.


From the law enforcement perspective, their assessment of potential troublemakers will change accordingly with a mindset akin to the prescient sci-fi classic “The Matrix” in which anyone can be an agent. It wouldn’t be shocking to see the soccer mom wielding a shotgun backing up by her partner-in-crime, the formerly mild-mannered, recently laid off accountant husband desperate for food and cash for their kids. The demographic to commit crimes for survival, not profit, is far wider and deeper than ever before.


Hard Numbers, Harder Life


The following series of charts provide an unpalatable wide-ranging view of how hyper-inflation is crushing wallets and spirits throughout the country similar to a disabled submarine sinking past their depth tolerances into the ocean blackness.


The following chart entitled Financial Woes on the Rise in the U.S. provided by Gallup, compares Americans’ financial concerns pre-pandemic and post-pandemic for the years 2019 and 2022 respectively:



Literally getting to the meat of the matter is your quintessential American comfort food in which the hamburger serves as a pie chart entitled How Inflation Changed the Price of a Hamburger provided by the Bureau of Labor Statistics indicates an April 2021-April 2022, year-on-year, comparative price change for various food items.


For those fortunate Americans who were in the enviable financial position to buy residential property, the spike in mortgage rates have discouraged many from pursuing the American dream of owning a home as indicated by the following chart entitled U.S. Mortgage Rates Surge to Highest Level Since 2009 provided by Freddie Mac.


Furthermore, for those recent graduates, homeownership may be an impossibility because of the onerous burden of student loans which “haunt” even the highly paid professionals into middle age. The following chart entitled Americans Owe $1.75 Trillion in Student Debt provided by the US Federal Reserve. In a nutshell, student loan debt has tripled in the last 15 years.



A breakdown of household debt per the US Federal Reserve of New York is provided in their May 20, 2022 press release in the following link entitled Total Household Debt Increases Q1 20022 Driven by Mortgage and Auto Balances.


Total 1Q2022

Category (in trillions)

Mortgage debt $11.18

Home equity $0.32

Student debt $1.59

Auto debt $1.47

Credit card debt $0.84

Other $0.45

TOTAL DEBT $15.84


According to the Federal Reserve of New York household loan delinquent payments (more than 90 days outstanding) across all categories have actually decreased somewhat except for student loans which rose slightly. This is a laggard indicator because the data does not reflect the most recent interest hikes.


In an attempt to control inflation the Fed plans to raise interest rates further through 2022 into 2023. These rate increases will be particularly acute for subprime borrowers who are mostly nonwhite and puts them in a double bind whether to spend their inflation ravaged income on rent/mortgage and food before paying loans.


US Consumer Costs vs The World


The following two charts provide a visual comparative perspective of how Americans deal with increasing costs vs their foreign counterparts elsewhere in the world underscoring the fact that these financial struggles are felt globally and inevitably the civil unrest to follow.


This chart is entitled How Gas Prices Compare Around the World provided by Global Petrol Prices. It’s best to make comparisons with similar economically developed countries because the taxation rate can vary considerably.


Many oil-producing countries with autocratic governments and are heavily subsidized such as Venezuela, North African, Saudi Arabia have far lower gas prices. On the other hand democratic yet economically socialist Norway whose oil production is more than sufficient to meet domestic demand thus exports a considerable amount of their production, still has onerous tax rates.


Finally the following chart entitled Inflation Woes Abound in Developed Nations provided by the organization of Economic Co-Operation and Development (OECD) presents how hyper-inflation is becoming an unrelenting beast.



Conclusion


Present-day inflation is just lifting off the launch pad and soon to enter hyper-drive. This trajectory is not a temporary inconvenience rather threatens to trigger historical social discord manifesting in long-term social unrest justifying greater governmental control over American freedoms such as emergency measures, which, if not already conveniently codified, certainly will be.



© Copyright 2022 Cerulean Council LLC


The Cerulean Council is a NYC-based think-tank that provides prescient, beyond-the-horizon, contrarian perspectives and risk assessments on geopolitical dynamics and global urban security.

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