A new macroeconomic equilibrium is now feasible

After the COVID crisis and due to the war in Ukraine, a new, coherent economic equilibrium will emerge in the euro zone and to a lesser degree in the United States: Inflation becomes high due to the fresh rise in commodity prices; Governments increase their public spending to offset the effect of higher commodity prices on household purchasing power and because more spending is needed on defence and, after COVID, healthcare, the energy transition and reindustrialisation; Central banks keep interest rates very low and real interest rates become extremely negative. This economic equilibrium is feasible, because it includes a very high inflation tax and a very high tax on bondholders, who give governments the funds to stabilise the purchasing power of household income and increase other public spending without increasing the public debt ratio.