Effect of Government Economic Policies on Global Inflation
The average CPI (Consumer Price Index) has drastically increased in 2021 mainly due to governments’ economic
policies shaped by the COVID-19 pandemic.
As we can see in the graphs below, the average government debt as % of GDP has increased from 61% in 2019 to 80%
in 2020. This suggests that these governments are taking loans from their central banks to counter the COVID-19
pandemic. As we can see, the average money supply growth has increased from 10% in 2019 to 18% in 2020. This jump is
explained by the central banks printing money to lend it to their governments. The increase in money supply has led
to global inflation which affects most countries’ citizens.
Governments should stop spending so much money on unemployment benefits since:
Keeping those benefits would encourage people to stay unemployed and collect a paycheck while contributing nothing to the economy of their country
The funds are directly used in consumer expenditure which is raising the CPI
Governments should instead adopt more long-term strategies that aim to increase production and help with the recession