What's the third biggest killer in America? It isn't cancer. It isn't heart attacks. It isn't car accidents, gun shot wounds or obesity.It is iatrogenic diseases. These are illnesses caused or made much worse by doctors in their attempts to cure patients.
It's a new word on me (learnt from my colleague Tim Price), but now I know it, I am finding uses for it all over the place. Modern monetary policy is effectively causing iatrogenic disease. It is designed to get rid of deflation. But as Tim points out in this week's , it is having exactly the opposite effect. By encouraging over investment and the misallocation of capital, and by keeping bad companies alive, super-low interest rates and quantitative easing (QE) are driving the oversupply of goods and services.
They could also be squashing consumer demand. Low rates are supposed to make us all want to spend more (why save when you aren't getting a return on your cash?). But does it? I suspect many of us aware that the magic of compounding isn't very magic with rates at 0.5% are saving more, not less, than we were. All this doesn't cause inflation it causes deflation. Not less of the disease, but more.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The next thing that could fit neatly intoour new word is the European Union.It was supposed to reduce friction between neighbouring countries; to boost all of our economies; and one way or another make us all safer. It doesn't take much thinking to find good examples of it doing the opposite. Would the economies of Europe's peripheral nations be in the mess they (still) are, if the EU hadn't pushed them into the eurozone?
Would Europe (and the UK) be safer without the Schengen area? Would the UK be on better terms with the rest of Europe if it wasn't starting to feel bullied by various European institutions? And would nationalist organisations be popping up all over the EU if its populations weren't beginning to be bothered by the democratic deficit that Europe represents?
We look at some of these issues in this week's magazine and we'll be looking at the rest in future issues (as well as at the consequences of the whole thing for your money). There'sJohn Stepek's take on Brexit (he's voting out) and we look atwhat the debate and the uncertainty it brings means for sterling.
Alexander Rankine gives his take on the consequences of Brexit for the rest of the EU. He says that, while the elites in the EU think the break-up of their empire is impossible, Brexit could make it happen: its departure would open the way for others to leave, or to demand special privileges to stay. So the push towards closer integration in the EU the thing that has so spooked the British could end up being the very thing that smashes it. You really don't get much more iatrogenic than that.
-
Mohammed bin Salman: The new face of Saudi ArabiaUnder the crown prince Mohammed bin Salman, Saudi Arabia's de facto ruler, the kingdom has pursued ambitious reforms to transform itself into a thriving 21st-century economy
-
Should you move your money out of the US?US exceptionalism – the belief that the US and its economy is different from and superior to other nations – is coming under fire as a concept
-
How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
-
The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
-
Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
-
Car hire and the strangeness of the post-pandemic economyEditor's letter A global shortage of hire cars and unusually high hotel occupancy rates sum up the post-pandemic global economy in a nutshell, says Merryn Somerset Webb, with enhanced demand meeting restricted supply.
-
Everything is getting more expensive – including moneyEditor's letter Investors are about to start feeling rather more pain, says Merryn Somerset Webb – from the rising price of money.
-
We may be heading for recession – and it will be no ordinary recessionEditor's letter Just as the downturn in 2020 was not a typical recession. the next downturn could be very different too, says Merryn Somerset Webb.
-
What companies should be prioritising this decadeEditor's letter In a world beset by uncertainty, companies should be prioritising slack over efficiency, says Merryn Somerset Webb.
-
Inflation could soon start to hurtEditor's letter Inflation is not going away. And with people's wages not keeping up, things are going to start to hurt, says Merryn Somerset Webb.
