Reasons Behind Rise in Global Prices of Goods & Services
بسم الله الرحمن الرحيم
Political Observation - Reasons Behind Rise in Global Prices of Goods and Services
Russia’s war on Ukraine constituted an added reason, following the Covid-19 pandemic, and its fallouts on the global economy have added insult to injury as prices rose and global economies were struck by inflation. Inflation, or the sharp rise in the consumer price index, constitutes one of the signs that affect the countries of the world the most without any discrimination between the so-called developing countries and the industrialized Western countries, which is expected to have an impact on the growth of global economy.
Inflation has risen in many world economies after the US Federal Bank and the Bank of England had decided to raise interest rates which is the Capitalist containment policy regarding inflation that central banks resort to in order to slow the rate of economic growth, which financial expert Steve Forbes described as “beyond preposterous” that the Federal Reserve was trying to control inflation by slowing the growth of the US economy saying “creating too much money that undermines the value of the dollar is the real cause” of inflation. President Putin pointed out in an interview with Russia TV channel that " the financial and economic authorities in the United States, of all things, found nothing better than to allocate large amounts of money to support the population and certain businesses and economic sectors, to the tune of “$5.9 trillion."
It has become common knowledge that the policies pursued by the US administration, including quantitative easing, which led to the steady rise in the prices of foodstuffs such as wheat and vegetable oil, and raw materials such as fertilizers, oil and gas which America and her “allies” attempted to attribute to the consequences of the war and Western sanctions on Russia, with politicians justifying the doubling of energy prices for consumers by claiming it was due to the uncertainty on both the energy supplies and energy prices, the rise of which affects most commodities. However, it is also common knowledge that consumer prices are not immediately affected by geopolitical crises because these prices are linked to long-term supply contracts.
Observers of US policy and economic realities would realise that America’s decision to compel Russia to wage war on Ukraine serves a number of goals, and although they are headed by weakening Russia, uniting Europe under the leadership of the United States politically, and under the leadership of NATO militarily, eradicating the notion of an independent European force that France has been propagating, it also aims to exploit the Russian-Ukrainian war to justify some of her policies such as imposing the reconfiguration of supply chains, floating the yuan, weakening countries such as Turkey and misleading the American public opinion about the real causes of inflation from which the world is suffering.
In fact, the policy of quantitative easing implemented by the Trump and Biden administrations to inject capital to revive the economy, save the American capitalist system and get out of the recession caused by the lockdown policies to contain the pandemic are the main cause of inflation in America. What has complicated the crisis experienced by the US economy after lifting the precautionary restrictions to combat the virus is the increase in consumer demand among the masses in America with the emergence of supply problems resulting from the supply chain crisis and China’s decision to implement the “Covid Zero” policy. This deception, which preceded the war and which was initiated by the Biden administration, justifying inflation as a result of the “solid recovery” in the labour market, the “strong showing in earnings” and attributing the sharp rise in prices to the market mechanism of supply and demand, and that any rise in prices “will end soon as balance is returned to supply and demand”; this corroborates their attempts to hide the main reason, namely quantitative easing.
As for the quantitative easing policy pursued by the US administration during the pandemic, it is epitomised by the Federal Bank issuing new paper money which strengthened the presence of the dollar in the market and this resulted in increasing the amount of cash in circulation in reality, as the US Treasury issued government bonds which, instead of selling them to investors, were converted into cash by the Federal Bank which is considered akin to minting new money electronically, and the practical result of which is a “decline in the nominal value of the currency”, namely the dollar, which in turn usually leads to a decline in the purchasing power of a currency as the value of assets, materials and commodities rise.
In fact, US fiscal policy, one of the tools of which is "quantitative easing", has sought, since the beginning of the Covid-19 pandemic, and according to the statement of Federal Reserve Bank President Jerome Powell, to “focus on supporting the recovery, increase demand, create further job openings and sustain economic growth without fear of excessive inflation” since, according to him, "inflation is transitory." However, the US inflation index rose to 8.5% in April, which is the highest since 1981, after it had been 0.7% before the execution of "quantitative easing" policies during the pandemic in July 2020.
What corroborates the Federal Bank’s knowledge of the quantitative easing stalemate, which resulted from the Federal Bank Finance Committee’s decision in November 2021 to induce a “reduction in asset purchasing operations”, a decision that several analysts described as highlighting the reality of the price hike dilemma.
This American fiscal policy, which is epitomised in the centrality of the dollar in global commercial transactions, global monetary reserves, and the evaluating of the countries’ wealth, especially oil and minerals, has moved the world’s wealth from underground to the vaults of her banks. Hence, the capital flows to the dollar has enabled America from making gigantic economic strides at the global level, funding her military superiority through an annual military budget of more than $800 billion in 2021, and consolidating her unilateral dominion over the international situation.
Through the centrality of the dollar in the global financial system, America has mortgaged the fate of peoples and countries to her financial policies and administered the global financial system through the Federal Bank in accordance with her interests, and extended her influence over the countries and peoples of the world who are now fulfilling the wellbeing of the United States from their sustenance and their faculties as a tax because of their dependence on the dollar and the financial policies of the United States and her banks. Evidence of this is the 2021 Net International Investment Position Index which shows America's $18 trillion commitment to the world.
What is occurring nowadays in terms of the living affliction of most of the world’s population and the catastrophic fates awaiting them, the extent of which only Allah the Almighty knows, is mainly caused by the vicious American Capitalist system and the criminal American policies. The successive events and crises since the economic crisis in 2008 at least, and the economic and financial policies, foremost of which is the quantitative easing policy, bring us back to what happened in the period of 1968-1971, in which the United States imposed the consequences of inflation and budget deficits on the countries of the world in general, and on the European countries in particular, as a “tax
paid by countries for using the dollar” as the European countries, for their part, refused to accept the inflation in the United States resulting from its bilateral deficit, as the European countries tried to convert what they had from dollars to gold as a safe haven, but President Nixon anticipated their move and took his notorious decision to “stop converting dollars into gold on demand”.
Hence, the economic deterioration that the regimes are threatening their people with is akin to Satan threatening them with poverty, and which was exemplified in the rise in the prices of goods and services worldwide, was not the result of the Russian war, although the war formed a tributary to it. Analysts have stressed that “global food prices began to rise since the beginning of 2021, as a result of the irresponsible policy pursued by Western central banks during the past years.” Any other pretext is but an attempt to cover the real causes which are pertinent to the Capitalist financial and economic system, and the policies of quantitative easing adopted by the Federal Bank, which runs the policy of the dollar throughout the world, and which analysts have described as a “financial chemical formula" that turns something worthless into cash.
The state of uncertainty about the global economic and financial future has no way out except through the system of Islam which does not allow investing in the suffering of peoples to achieve material values. Islam has rather come as a mercy to humankind. Islam rejects money that does not derive its value from itself, such as gold and silver, and does not look after the interests of the business community and the state at the expense of the rest of the people. It does not allow what is public property to be owned by the state or individuals. The ruler in the Islamic state is not an obedient servant of the rich and the capitalists. He is rather a “shield from behind which the Muslims fights and seek protection”. Al-Faruq Omar, may Allah be pleased with him, epitomised the personality of the statesman in the best form of responsible care in the year of the famine which was preceded by nine months of drought, when people starved and crops and cattle were destroyed. He he hosted 60 thousand men and dependents who came from the desert to the city, and he commanded men to take care of their interests, until Allah ordered the sky to rain. Then Al-Faruq ordered his men to take them out to the desert and give them food and lambs.
Hence, the State in Islam is a state of the Ummah rather than individuals, families and parties. The authority of the Islamic State is derived from the Ummah rather then factions and classes, and its system is derived from the heavens; it is not determined by expedient and partisan interests or by whims and desires. It is the only system whose source of legislation does not seek expediency for itself because its origin is the Creator who does not stand in need of anything from His servants.
1 Muharram 1444h hizbuttahrir.org
30 July 2022