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In this blog, we explore the following question: what does it actually mean when economists and policymakers warn about deflation, while citizens all over the world experience that everything is becoming more expensive? After all, the prices of food, housing, energy, and healthcare have risen sharply in recent years. Yet, warnings about the increasing threat of deflation are heard more and more often.
A recent article by Mardel Norte (click here) describes the phenomenon mentioned above as a problem for central banks, but it touches on a much broader structural issue that is not limited to one country or continent.
The additional central question is therefore: what do the current developments mean for ordinary people, entrepreneurs, and societies worldwide? And how is it possible that there is talk of deflation, while the reality for most people shows the opposite?
The paradoxical overview of concepts
Let us first go through a number of concepts and explain what they mean, and especially what they mean in practice for society.
Inflation means that the general price level rises. Deflation, on the other hand, means that the average price level falls. But there is also ”disinflation”, which means that the inflation rate decreases, for example from ten percent to two percent, but prices are still rising, only less quickly.
The confusing thing is that economists often speak of “deflation” when they actually mean that inflation is dangerously close to zero. They do not warn because prices are already falling, but because the pace of price increases is becoming so low that it could turn into real deflation. This explains why the word “deflation” appears, even when people everywhere see prices rising: economists are referring to a decrease in the rate of increase, not necessarily to actual price decreases.
However, this confusion about concepts is only the tip of the iceberg. To understand why this is such a big problem, we need to look more deeply at what deflation really means for economies and why central banks are so afraid of it.
Why deflation is seen as a danger
Deflation, once again, means a general decrease in prices in an economy.
Economists fear deflation because it can cause consumers and businesses to postpone spending. People may think, “I will wait to buy or invest, because soon it will be cheaper.” As a result, economic activity slows down, fewer products are sold, company profits fall, and unemployment and debt can increase.
To prevent this, central banks often lower interest rates. In this way, they hope to make credit cheaper, so that more is spent and invested. The European Central Bank aims for an inflation rate of about two percent, which is high enough to prevent deflation but low enough to avoid savings losing value too quickly.
But here lies a major confusion and a clear paradox: in the daily reality of most people, there is no deflation, but rather ongoing and noticeable inflation. To understand this properly, it is important to be aware, once again, that in recent discussions by the ECB, there is talk of “too low inflation” or “the risk of deflation,” not because prices are already falling, but because inflation is coming dangerously close to zero percent. The problem with this approach is that the language used is misleading, which causes confusion. When people say “deflation,” they often mean the danger that prices will eventually fall if inflation becomes too low. So, it is more of an economic warning signal than a reflection of the current situation.
We also see that while policymakers worry about theoretical deflation, ordinary people experience the opposite problem. This brings us to the next question: what does inflation really mean for people in their daily lives?
The real impact of inflation on ordinary people
Inflation means that prices rise, but not everyone feels its effects equally. In practice, we see that since the coronavirus pandemic, the costs of essential things like food, rent, healthcare, and energy have almost doubled in many parts of the world. At the same time, incomes in many sectors have hardly increased, making it difficult for many people to make ends meet.
Inflation has several effects. Savings lose their value. With 5% inflation, $10,000 in savings loses $500 in purchasing power each year. This has several serious consequences for people and the economy. In other words, you can buy fewer goods and services with the same money than the year before. This leads to a direct financial loss if you do not actively use your money, for example by investing it in assets whose value can rise with or faster than inflation, such as real estate, stocks, or commodities.
A concrete example is someone who saves for years for a house with a savings account that has an interest rate lower than inflation. In fact, this person loses money every year because the price of houses and other essential goods keeps rising, while the saved amount loses value. This can discourage people from saving and encourage them to look for other ways to protect their wealth, which in turn affects investment and consumption in the economy.
We already see that housing has become unaffordable in almost all parts of the world for first-time buyers and people with middle incomes who live locally or in their own country. Entrepreneurs can also take fewer risks and invest less because their costs are rising while their customers have less to spend and their savings lose value.
People with low incomes also face major disadvantages due to rising prices, because they often spend most of their income on basic necessities such as food, rent, energy, and healthcare. When the costs of these basic needs rise, they have to make difficult choices: for example, buying less or cheaper food, saving on heating, or postponing medical care. This not only leads to a lower quality of life but also to stress and uncertainty about the future. Because these essential expenses are unavoidable, there is often little money left for other important things like education, transport, buying a house, or building a buffer for unexpected expenses. As a result, financial vulnerabilities only increase, and it becomes increasingly difficult for people with low incomes to remain financially stable.
And even those who would like to invest to compensate for the effects of inflation notice that traditional investments such as stocks or real estate are often volatile or difficult to access at the moment. In addition, the interest rate on savings accounts in many countries is lower than inflation, so savings, once again, slowly lose value.
And let us not forget the most important point: an important issue that many economists sometimes overlook is that they mainly look at the average inflation rate of all goods and services together. While this average may fall, the prices of essential needs such as rent, fuel, and energy may continue to rise. For many people, these basic needs make up the largest part of their expenses. At the same time, because people have less to spend, it is possible that the prices of less necessary products, or secondary and luxury goods such as electronics and luxury items, actually fall. This can push the average inflation rate down. As a result, the official figure often does not match and does not reflect the daily reality in which people mainly face rising costs for essential needs. This can make many people feel that their situation is not recognized because their personal expenses are rising much faster than the inflation rate suggests.
In my experience, this reality is often hidden behind statistical averages that give a much more positive picture than what people actually experience. Let us look at this more closely, because it leads to an important problem in the way economic data is presented and interpreted.
Why average figures are misleading
In policy discussions, people often talk about averages: average income, average wealth, average inflation. But these “averages” hide structural inequality.
For example, if a small percentage of the population are billionaires, the “average wealth” in a country may seem high, while most people have hardly any savings, do not own a home, and have no access to financial markets.
This statistical distortion means that some policymakers have less insight into the reality of ordinary citizens. Policy is then mainly based on macroeconomic models, while the situation in daily life can be much more complex. Real wealth inequality becomes less visible through these averages, so the gap between rich and poor may be larger than some policymakers recognize.
In fact, at many events I have attended so far, it seems that some important figures and economists do not really understand what is happening, because they are too far removed from the daily reality of poor people. For example, when I ask how many poor people or poor neighborhoods they have actually visited themselves, how representative their data is, and how valid their samples are, I am often looked at as if I am speaking an unknown language. This shows how big the gap is between theory and practice, and how difficult it sometimes is to get attention for the real problems of vulnerable groups.
Finally, as mentioned above, the inflation measurement system often does not match what people really feel. Prices of basic goods often rise, while the official inflation rate falls because of cheaper products. As a result, the picture of financial pressure is not always accurate. This distortion is related to another structural problem: the unequal distribution of the tax burden, where the biggest beneficiaries sometimes contribute the least. Below, I briefly explain what this means.
The tax paradox: some companies avoid taxes, citizens pay
Another structural problem is the shift of the tax burden to citizens, while some multinationals avoid taxes through clever constructions. They register their profits in so-called “tax havens,” which are countries or regions with very low or no tax rates. In this way, they benefit from differences in legislation between countries and therefore contribute relatively less to national budgets. In addition, some of these companies invest large amounts in the stock market and earn a lot of money using advanced technologies such as supercomputers. With the help of so-called quant funds and high-frequency trading, they use complex algorithms to trade extremely quickly and maximize profits. It is important to realize that much of this income is often not considered regular business income by governments, so it falls outside the traditional tax system. This strengthens the unequal distribution of the tax burden and means that ordinary citizens and small business owners have to bear a relatively larger share of the costs.
The result is that governments receive less tax revenue, so there is less money available for education, healthcare, sustainability, and social safety nets. Innovative programs and public investments are then postponed or even canceled. Meanwhile, the middle class faces higher VAT, rising energy costs, and more indirect taxes. In the long run, this also means there is a great risk that the middle class in many countries will slowly disappear, increasing social and economic inequality and putting even more pressure on low-income groups. This can lead to less economic stability, less social mobility, and a society that becomes increasingly divided.
The above also affects inflation. To make up for the shortfall, governments may increase indirect taxes such as VAT and sometimes import duties to protect their own economies. These measures increase costs for consumers and businesses, causing household expenses to rise further. Especially middle- and low-income groups experience more financial pressure, which increases economic inequality and can undermine the stability of the country. This also indirectly affects inflation figures, because rising taxes, import duties, and costs for essential goods increase people’s daily expenses, while official inflation figures often do not fully reflect this effect.
Tax avoidance not only undermines government finances but also trust in the “system.” Ordinary citizens see that they are paying more and more, while large companies that benefit most from public infrastructure and education contribute the least.
In short, this unequal distribution of burdens creates a destructive spiral in which falling purchasing power leads to even less tax revenue, which only makes the problems worse.
The vicious circle of falling purchasing power
As we saw above, people spend less for various reasons due to falling purchasing power and rising inflation. This leads to less revenue from VAT and income tax and reduces economic activity. As a result, government finances come under even more pressure. While technology, AI, and automation are advancing rapidly, the average citizen often does not have enough money to invest in their own education, retraining, or strengthening their mental resilience for the future.
The result is that societies fall behind in structural renewal, while the pressure on people and systems increases. This vicious circle then reinforces itself: less consumption leads to less tax revenue, which leads to fewer public investments, which leads to less economic growth and even less consumption.
This economic pressure also has direct consequences for entrepreneurs, who form the backbone of every healthy economy but now face unprecedented challenges.
Why entrepreneurs are currently cautious worldwide
Entrepreneurship is about taking risks and creating opportunities for yourself, society, and the planet. Entrepreneurs create new jobs, produce goods, drive innovation, and provide solutions for social and environmental problems. Without them, growth stagnates and progress does not happen. That is why it is important that they receive support to grow and make a positive impact. However, we see that in the current time, when everything is becoming more expensive, margins are shrinking, wages are rising, and consumers are spending less, many small and medium-sized businesses find the risks too great and dangerous to take.
Worldwide, entrepreneurs are also dealing with inflation: unaffordable rents, high labor costs without proportional revenue growth, limited access to credit, and structural uncertainty due to geopolitical tensions, rising energy prices, and shortages of raw materials.
For example, in practice we see that materials and raw materials have often become twice as expensive since the coronavirus crisis. At the same time, entrepreneurs in the West do not dare to increase sales prices to the same extent because customers then have less to spend. An example of this is the Douwe Egberts coffee scandal, where the purchase price rose sharply, but supermarkets in the West did not dare to double the consumer price. As a result, there is a risk of shortages of products on the shelves.
In short, inflation hinders innovation, growth, and renewal, while these are badly needed. This economic pressure not only has financial consequences but also affects people personally and emotionally, with far-reaching effects for society as a whole.
We can therefore speak of “major system failures.” As we saw above, inflation mainly affects working people and savers, not just the wealthy. People worldwide are struggling with rising costs, debts, and poverty. Globalization also means that financial problems spread quickly, while inequality is increasing in many countries. Because of the scale and complexity of such challenges, it is clear that small adjustments are not enough; a fundamental change of the system is needed.
Why pursuing higher inflation is problematic
Let us now focus on why aiming for a higher inflation rate can be problematic. After that, we will look at what needs to change and how we can make economic systems stronger and fairer for everyone.
The fundamental problem with current economic thinking is that central banks and economists often see inflation as a solution to economic problems, while, as we saw above, for many ordinary people it is actually the problem. The ECB deliberately aims for an inflation rate of 2% per year, which means that life becomes on average two percent more expensive every year.
But what does that 2% inflation actually mean in practice? Let us take a closer look.
At first glance, an inflation rate of 2% per year seems relatively low and manageable. However, it is important to realize that inflation is not a one-time price increase, but a process that accumulates year after year. This means that prices rise by 2% each year on top of previous increases. Over twenty years, this can add up to almost 50% higher prices, and over thirty years even to more than 80%.
It is also often forgotten that percentages work cumulatively. This means that the increase is not recalculated each year on the original amount, but on the total that has already increased. A concrete example: for a product costing €100 that becomes 2% more expensive each year, you pay €102 after the first year, €104.04 after the second year, and so on. After 30 years, you do not pay €160 (30 x 2% = 60% on €100), but about €181, which is 81% more.
For people whose salaries do not grow with inflation, this leads to structural impoverishment. If wages rise by 1% per year while inflation is 2%, purchasing power falls by 1% each year. After ten years, that is a loss of about 10%, but due to the cumulative effect, it often feels even heavier in the wallet.
In addition, a small increase in the price of, for example, oil or energy has a much greater effect than it seems. When oil rises by 2%, the costs for transport, production, and distribution of almost all goods become more expensive. These extra costs are passed on in the prices of food, clothing, electronics, and other products. In this way, a price increase at one point in the chain leads to a chain reaction throughout the economy. As a result, consumers feel much more pressure in their wallets than the 2% suggests.
The perverse thing is that inflation can actually be beneficial for people with assets, such as real estate and shares. Their assets increase in value, while their debts become relatively smaller. In this way, inflation acts as a hidden tax on people without assets and a hidden subsidy for the wealthy.
The argument that inflation is needed to stimulate consumption also does not match reality. People have to buy their basic needs such as food, housing, and energy, regardless of the price. It is mainly luxury spending that is postponed, not essential spending. Moreover, postponing purchases often leads to more conscious and sustainable buying, which is better for both the environment and personal finances.
Finally, the idea that debts become lighter due to inflation only applies to people with debts. For savers, especially older people and those who are more cautious, inflation means that their savings lose value. For them, inflation is pure loss of purchasing power. And people with savings often also have the opportunity to start a business, but as explained above, that becomes impossible in such situations.
In short, the seemingly low target of 2% inflation per year translates in practice into a growing and complex burden for households. This underlines how important it is to see the impact of inflation not only as an abstract percentage, but as a reality that deeply affects people’s daily lives.
The dangerous spiral of higher inflation and currency devaluation
Perhaps the most important point: higher inflation means that extra money must be printed to pay for rising costs, such as interest, salaries, and other expenses. This extra money causes the value of money to decrease further and further. Because it is impossible to simply withdraw money from the economy again, more and more money remains in circulation. This leads to a vicious circle: more money in circulation means higher prices, which causes inflation to rise even further.
When this spiral gets out of control, it can result in hyperinflation: a situation in which prices rise extremely quickly and people’s purchasing power almost completely disappears. Examples of countries that have experienced this include Turkey, Iran, and Venezuela. Hyperinflation is usually irreversible and often forces a country to take drastic measures, such as introducing a new currency and withdrawing the old one, in order to stabilize the economy.
If important currencies like the US dollar start to show signs of hyperinflation, this can have far-reaching consequences for the world economy. The dollar is, after all, the most important reserve currency and plays a crucial role in international trade and finance. Instability in the dollar can lead to global economic uncertainty, disruptions in trade flows, and a loss of confidence in financial markets.
In short, higher inflation is not just an abstract number; it can lead to a dangerous downward spiral of currency devaluation that has serious economic and social consequences, both nationally and internationally. Preventing this spiral requires thoughtful and strong measures that go beyond simply printing more money.
By the way, if we look at history, we see that almost all currencies last on average between 50 and 100 years before they are replaced or suffer a significant loss in value. This is often due to too much money in circulation, which causes inflation. This does not mean the money suddenly becomes worthless, but that it is gradually replaced by a new type of currency or that monetary policy is adjusted. A well-known example is the transition from coins made entirely of gold to coins partly made from cheaper metals. As a result, the purchasing power of the money gradually declined.
The cause of this loss in value often lies in printing money too quickly, something that has been happening for centuries and remains relevant today. The challenge is to learn from this and make the financial system stronger and more sustainable. This can only be achieved through greater transparency, responsible policies, and effective cooperation between countries.
What governments and banks must do now in times of inflation and deflation
As we have seen, governments and banks face a major challenge due to complex financial systems and sometimes conflicting interests. The traditional policy of central banks, which focuses on interest rates and money creation, often does not solve the real problems of citizens. In fact, it is often only a temporary solution that causes major problems in the medium and long term. In the worst case, this leads to hyperinflation, where the value of money falls rapidly and savings disappear completely, so that people can no longer afford anything.
What governments and banks should do is explained below.
1: Direct protection of purchasing power
Governments must prioritize protecting the purchasing power of citizens. Instead of waiting for the effects of low interest rates, direct measures are needed, such as targeted tax cuts for low and middle incomes, energy subsidies for households, or a universal basic income that automatically grows with inflation.
2: Focus on median incomes and exclusion of outliers
The current system often measures purchasing power using averages that are distorted by extremely high incomes of a small group of billionaires. This gives an unrealistic picture, so that policy does not match most people’s reality. That is why it is important to remove these outliers from calculations and focus on the median income group, which represents the majority of the population. In countries like Canada and the United Kingdom, this approach is already used to map purchasing power more realistically and to make more targeted policies that really help. In this way, governments and banks can more effectively protect the purchasing power of most citizens, instead of focusing on averages that mainly reflect the wealth of a few.
Reforming inflation measurement is therefore crucial. The current system of measuring inflation gives a distorted picture because it is based on averages that do not reflect the reality of ordinary people. Governments should switch to differentiated inflation measurement that takes into account different income groups. A low-income family that spends seventy percent of its budget on food and housing experiences inflation very differently from a wealthy family that spends only twenty percent on these things.
3: Strategic price regulation for essential goods
For basic needs such as food, energy, and housing, free markets can fail. Temporary price caps and targeted subsidies for producers can prevent shortages and ensure affordability during periods of high inflation.
4: Restructuring the tax system
To ease the unequal distribution of inflation’s pain, wealth taxes, higher taxes on speculative investments, and measures against tax avoidance by multinationals are necessary. At the same time, progressive consumption taxes can tax luxury goods more heavily than basic needs.
5: Improving financial education and accessibility
Financial education and accessibility must be drastically improved. Many people do not have access to investment opportunities that could protect them against inflation. Governments could set up public investment funds that are accessible to all citizens, regardless of their wealth. These funds could invest in inflation-resistant assets such as real estate, commodities, and infrastructure.
6: Stimulating local economic resilience
The current dependence on global supply chains makes economies vulnerable to external shocks that lead to inflation. Governments should subsidize local food production, energy generation, and the production of essential goods.
7: Anticipating deflation scenarios
Instead of fighting deflation by injecting more money into the economy, which mainly benefits the wealthy and at the same time lowers the value of the currency, governments should focus on controlled deflation. It is very important to realize that printing a lot of money almost always leads to currency devaluation, more inflationary pressure, and eventually even hyperinflation as a possible end point. A more effective approach is to structurally lower the costs of basic services such as healthcare, education, energy, and public transport. This way, people have to spend less, without a lot of extra money entering circulation, which protects purchasing power without fueling inflation. In addition, the tax system can be adjusted by taxing luxury spending more heavily. This leads to a fairer distribution of the burden without unfairly increasing the tax pressure on entrepreneurs, who often already pay relatively high taxes. Local or complementary currencies can also be used to strengthen the regional economy without reducing the value of the national currency. By using local currencies for certain services, such as through exchange systems or time banks, the national money supply remains unchanged. This increases the resilience of communities without macroeconomic disruptions.
Furthermore, investments in affordable housing, energy efficiency, and local food production help to structurally lower the fixed costs of households. This makes life more affordable without the need to create extra money. Such investments can also be financed through green bonds or public-private partnerships, which reduces direct pressure on government budgets. In the medium term, these projects also deliver economic growth and lower costs.
Debts can also be made more manageable, for example by offering microcredits or restructuring loans with longer terms and lower interest rates. In this way, both citizens and entrepreneurs can pay off their debts without the government having to print money. In addition, taxes on unhealthy or environmentally harmful products, such as sugary drinks, tobacco, alcohol, or polluting energy, can generate extra income and reduce social costs. Such “health taxes” can make a significant contribution to closing funding gaps in healthcare and public health.
Strategic price regulation for essential goods should therefore be considered. While free markets can be efficient for luxury goods, they often fail for basic needs such as food, energy, and housing. Governments could set temporary price caps for essential goods during periods of extreme inflation, combined with targeted subsidies for producers to prevent shortages.
Finally, public-private partnerships can help keep social services affordable and accessible without extra pressure on the economy. Strict budget tools and monitoring mechanisms, with clear goals and accountability, ensure that every euro is used effectively. By combining all these measures, controlled deflation becomes achievable without the currency losing value. This creates a more stable and fair economic system in which entrepreneurs, who already contribute a lot, are not unfairly taxed more.
8: International coordination
Inflation and deflation affect countries worldwide, making international cooperation between governments and central banks essential. Governments must make agreements on tax rules, exchange rates, and joint strategic reserves of important goods such as food, energy, and medicines. These reserves help prevent sudden price increases or decreases. At the same time, our monetary system is already changing: in addition to major global currencies such as the US dollar, more and more local digital currencies are emerging, such as cryptocurrencies and community tokens. Although these local currencies are already used in some places, there is not yet a clear and stable international arrangement for their role in the economy. To make these new forms of money work well, countries must make agreements about cooperation with central currencies, official recognition of local currencies, and safe management.
In this way, local currencies can help strengthen regional economies and stimulate sustainable, circular trade flows. International cooperation should therefore not only focus on managing the global economy, but also on supporting local innovation and independence in financial systems. Technologies such as blockchain and artificial intelligence can play an important role in this, provided they contribute to broad prosperity and inclusiveness. In this way, a new balance is created in which global and local interests reinforce each other instead of working against each other.
9: More transparency and democratic control over monetary policy
It is important that citizens are more involved in decisions about financial matters, so that their opinions help determine which choices are made. It is also necessary to look clearly at how policies affect different groups in society.
10: Using (Gen) AI as a tool to manage inflation
(Gen) AI can be a powerful tool to manage inflation and hyperinflation effectively. By analyzing real-time economic data and applying predictive models, governments can simulate policy options and estimate their social and economic impact in both the short and long term. This makes it clear which measures affect which population groups, and what the effects are on purchasing power, employment, and access to basic services. This makes policy more precise, fair, and future-proof. In addition, (Gen) AI can help optimize supply chains, predict shortages, and stabilize prices. In extreme cases, such as hyperinflation, AI can even be used to develop and manage alternative currencies such as local tokens or blockchain coins, to keep economic activity going at the local level when the national system fails.
Fintech and AI together also make it possible to work smarter and more future-oriented. With scenarios and AI as tools, goals are achieved faster and more effectively. How this works in detail will be explained in a separate blog in the coming weeks.
11: Preparing for system change
Preparing for system change is perhaps the most important point of attention. The current financial system is unstable and continues to increase inequality. Governments should experiment with alternative monetary systems such as local currencies, time banks, and blockchain-based systems that are less dependent on traditional banks and central authorities. A further explanation follows below.
The complex challenges and solutions mentioned above require a fundamentally different role for government. It is no longer enough to adjust interest rates, active intervention is needed to compensate for the negative effects of the current system and to prepare alternatives.
What is still needed and, above all, already possible
The old model of “economic growth through consumption” has actually reached its limits. Worldwide, we need a new, future-proof system that is based on real value instead of abstract growth. A system that focuses on sustainability, health, knowledge, and well-being, rather than just more consumption. A system that stimulates local and circular economies instead of centralizing everything. A system that supports new forms of exchange, time investment, and co-creation.
We need policy models that are developed based on what people truly need, not on abstract economic theories. This means investing more in time banks, local currencies, cooperatives, and other forms of economic organization that give people more control over their own lives.
It also means rethinking what we mean by “value.” Time, care, creativity, and community are all forms of value that are not well measured in our current economic system but are essential for human well-being.
One of the most promising developments in this area is the rise of blockchain technology and digital currencies that make real decentralization possible. These technologies offer concrete alternatives to the current centralized financial system that excludes many people. For example, blockchain-based systems and digital currencies, such as local community tokens, can enable communities to create their own economic ecosystems, independent of traditional banks and central authorities. Think of a local currency that can only be used for services within a certain region, so that money keeps circulating locally and supports local entrepreneurs. There is also tokenization, which makes it possible to divide ownership of assets into much smaller units, making investments more accessible to ordinary people. Instead of having to buy an entire house, people can buy tokens that represent a small part of real estate or tokens that entitle them to a share of the proceeds from solar panels in their neighborhood.
So-called Decentralized Autonomous Organizations (DAOs) can also play an important role in this. These are organizations that operate in a revolutionary way: decisions are made collectively by all members, without traditional hierarchies. DAOs can manage ownership, finance projects, and distribute value fairly and transparently. For example, imagine a DAO that manages solar panels in a neighborhood, where all residents are co-owners and benefit from the energy produced. Or a DAO that supports local artists, where community members vote on which projects are funded with shared resources. The need for such changes is becoming more urgent as the consequences of the current system accumulate and new challenges arise.
Paying with virtual currencies through platforms like Twitter or offering subscriptions via Facebook is already possible. This creates a new digital payment system where users can pay directly and securely without banks or traditional payment providers. This increases financial autonomy and speeds up transactions, especially within online communities.
Furthermore, local initiatives are emerging where people share their internet connections with neighbors. By bundling internet, they can significantly reduce costs and ensure better access to fast and affordable internet services. This promotes collaboration within neighborhoods and lowers individual expenses.
We also see innovative housing projects where groups of citizens jointly purchase and manage apartment complexes. These cooperative living arrangements focus on self-sufficiency and sustainability. Residents invest together in renewable technologies like solar panels to generate their own energy. This solar energy can be shared locally within the community, reducing dependence on the traditional energy grid and lowering energy costs for everyone. Additionally, these buildings sometimes include space for local food production, such as community gardens or greenhouses, enhancing the community’s livability and self-reliance.
Even more interesting are the completely new economic models that are emerging, in which money no longer plays a role. These systems are based on the direct exchange of value between people, without the involvement of financial institutions. Capacity exchange is a powerful example of this. Imagine a graphic designer exchanging services for IT support from a programmer, who in turn exchanges website maintenance for accounting services from an accountant. This triangular exchange creates value for everyone involved without any money changing hands.
Time banks work on a similar principle: one hour of work from person A is always equal to one hour of work from person B, regardless of the type of work. A doctor who gives one hour of medical advice receives one time credit, which can be exchanged for one hour of gardening from a gardener. This system recognizes that all human time is equal.
There are also skill-sharing platforms, which make it possible to exchange knowledge and skills directly. Someone who can play the piano gives lessons to someone who wants to learn to cook, who in turn gives cooking lessons to someone who can play the guitar. This circular exchange of knowledge creates value without money.
In different parts of the world, we also see other successful experiments with new models, such as CSA (Community Supported Agriculture). In CSA, consumers pay in advance for a whole season of vegetables and receive a box of fresh, local products every week. This gives farmers financial security and gives consumers easy access to healthy food.
We also have Repair Cafés and Tool Libraries, which show how communities can work together to share resources instead of everyone owning everything individually. Why should everyone buy a drill that they only use a few times a year?
In the Netherlands, we also see the rise of co-housing projects and eco-villages. Here, residents experiment with shared ownership and collective decision-making. Together, they invest in sustainable technologies and facilities that are often too expensive for individuals to pay for alone.
Why our economy must fundamentally change: learning from repeated crises
There is a well-known saying: “If you always do what you’ve always done, you’ll always get what you’ve always got.” This also applies to our economy. Even though we can learn from the past, we seem to keep making the same mistakes: on average, there is a new economic crisis every ten years. This pattern shows that something fundamental must change in how we manage the economy and how we look at it.
Our current economic systems and policy tools are often not designed to be sustainable and resilient. We keep holding on to old ways of thinking and mechanisms, while the world around us is changing rapidly. This leads to the same problems over and over again: periodic economic crises, increasing inequality, inflation, rising poverty worldwide, growing uncertainty, and even (trade) wars.
These economic crises, such as the recessions of the 1980s, the financial crisis of 2008, and recent disruptions caused by pandemics and geopolitical tensions, show how vulnerable our system is. They cause great harm to people’s lives, markets, and social stability. Yet we seem to make too few structural changes to prevent repetition.
If we really want to prevent these cycles from repeating, we need to change not only the tools and rules but also our mindset. We need to think differently about growth, value, risk, and cooperation. By working with scenario-based approaches and using smart tools like AI, we can better anticipate future challenges and manage more effectively.
In short, the key lies in daring to let go of old patterns and developing new, future-proof steering mechanisms. Only then can we ensure an economy that does not keep making the same mistakes but does achieve sustainable progress.
Conclusion
In short, we are at an important turning point. The current crisis is not only financial but also social, mental, and ecological. The old system is failing and calls for fundamental change. Small adjustments, such as changing interest rates, are not enough and, as we saw above, can sometimes even have the opposite effect.
If millions of people worldwide feel that saving is pointless because inflation reduces their wealth, that entrepreneurship is too risky due to unpredictable markets, and that investing is unfeasible due to high costs and uncertainty, then it is clear that more needs to change than just the interest rate. We need an economic system that truly works for people, where financial security, fair opportunities, and sustainable growth are central—not a system that forces people to consume and then leaves them behind.
That is why we need courage, creativity, and solidarity to build a new, just, and sustainable economic system in which no one is left behind. Change is inevitable. The question is whether we will shape it consciously or keep holding on to a failing model…?!
Also read this blog if you want to know how the prices of goods are influenced by the stock market, even when the market is highly volatile.
More blogs to follow
In the upcoming blog series on this topic, I will clearly explain which steps you can take to protect your wealth. I will also discuss new earning models and systems that can contribute to a fairer global financial system. So keep an eye on my blogs, and feel free to leave a comment below if you have questions, want to share experiences, or have input for future topics.