Inflation vs. Unemployment

These days I've been thinking about what's going to happen to the world economy and western societies in the near future. This is just a stream of consciousness, so bear with me.

So what's worse inflation or unemployment, and what should we expect in the near future? I believe we can expect both, but while everyone is afraid of unemployment, and everyone knows its effects, people underestimate or don't appreciate the crippling power of inflation. Inflation is a very soft-sounding word, almost like it's describing a good thing. While it refers to inflation of prices, if you look at it in another way, it describes a devaluation of a currency's value.

Unemployment affects society in a very uneven way. People with jobs have a fundamentally different experience than the people without. There are the haves and the have-nots (for this example it's people who have an income, and those who don't). On the other hand, inflation is indiscriminant. Everyone is affected, people and businesses, public and private sector. High inflation affects society at its core, shaking its structural foundations.

It undermines trust in people and institutions, it dissolves lifetimes of savings, it creates a feeling of a shaky ground under your feet, like you don't know what's going to happen tomorrow. The main side effect of high unemployment is increased levels of social unrest and crime. The main side effect of inflation? Not really sure, to be honest,

The stability of the money supply has been so essential to the functioning of the Western world, and we've learned to trust that component in our lives so much that we don't even think about it. Anyone born after World War II in Western Europe or America has not likely experienced inflation above 20%, and most of the time they have not seen inflation above 12-15%. (I'm making up these numbers, but I believe them to be ballpark-accurate). Thus very few people in this society are prepared to even imagine what would happen if the inflation broke thru the 20% ceiling. And yet that's very likely to happen, with Western governments borrowing without restraint for several decades, the currencies true value has been held up artificially high by further borrowing. Now the bubble is beginning to burst.

If inflation breaks thru 20%, which it very likely will do, people will start losing trust in money as a medium of exchange. Governments will start losing their ability to borrow at low rates, driving interest rates up. This is when the fosset dries up. Borrowing from banks or other individuals will completely change, if not be rendered completely useless. The rates charged by the lender have to be higher than inflation, which in times of crisis is not always predictable. Laws will have to be rewritten, enforcement of economic transactions will need to be reconsidered. A lot of things will fundamentally change. Chaos on the streets? Oh yes, very much so.