2020s - what a decade and it is only 2022

2022 started with lots of hope: we thought (and rightly so) that we were going through the last Covid winter here in Europe, the economy was recovering more swiftly than expected and inflation was increasing but not really considered a major problem yet.


The 24th of February changed everything with Putinโ€™s aggression against Ukraine, the first time war hit Europe in its core since 1945. Everyone in Europe ended up with some embarrassment. The Germans as they had bet on cheap Russian gas and had looked for too long the other way as Putin had become more and more aggressive; the French as Macron tried to negotiate with Putin when it should have become clear that it no longer served any purpose; the UK as it had become home to lots of Russian money and political influence over the past decade or two. 


The biggest surprise (at least outside Ukraine) was the fierce resistance by Ukrainians and their ability to push back. Europe and the US came around to support Ukraine relatively quickly, something that certainly would not have happened under president Trump. However, the political will to support Ukraine is primarily in the democratic centre, both in Europe and the US.  The left keeps asking for a negotiated solution (as in: what share of Ukrainian population is Putin allowed to massacre). Among economists, Jeffrey Sachs decided to go all-in for the Russian side โ€“ sad to see how intelligent people get so captured.  The right wants to do a deal with Putin โ€“ Ukraine in return for cheap energy. The invasion of Ukraine by Putin and the heroic resistance by Ukrainians is thus part of the broader conflict between democracy and populism/autocracy I have written about earlier. 


Inflation has become a major issue across the globe, though inflation expectations still seem to indicate that the anchor has not been lost.  Central banks face a major conundrum โ€“ tighten too much and too fast and risk a recession; tighten too cautiously and risk de-anchoring of inflation expectations.  While there are many indications point to lower inflation rates in 2023, there might be additional unexpected shocks. 


The crypto tulipmania seems to finally deflate (on a personal level most obvious in that my non-economist son stopped asking me to invest in bitcoin ๐Ÿ˜Š). You can fool some people all the time and all people some of the time but not all people all the time. Yes, there are good solutions for the use for distributed ledger technology, but cryptocurrencies do not seem to be one of them.


The 1920s were certainly a decade that started with a lot of hope, after World War I and the Spanish influenza. It ended with the Great Depression, though in between there were some good years. I will certainly not try my hand at predictions (where economists continuously fail), but the 2020s certainly do not seem like a happy decade so far. It rather seems to turn into the decade of the Great Volatility.