If you are 20 or older, your parents and grandparents were born and raised in a world defined by an international agreement entitled Bretton Woods, for the place it was signed. The Bretton Woods Agreement was about how nations manage their economies and how nations would do business with each other. It established basic rules for international trade and supported nations to build their economies through a model called welfare state. In a welfare state economy, governments would directly run businesses or tell how private businesses should be run for the economic and social welfare of all. It wasn’t socialism. It was to make private enterprise possible after two world wars. For your parents and grandparents, making a living was about employment or doing business under government regulations to every detail. In return, they received job security, business protection from overseas competition, and mostly reliable pension plans. Governments did not guarantee to make a living. They protected those who do.
The Bretton Woods system begun to fail in the early 70s but it remained in place to some extent until the fall of the Soviets in the 80s. Consequently, the welfare state is deeply rooted in your parents’ and grandparents’ understanding of the world. It is how you have certain notions about the attributes of the world in your thinking.
An opposite world order called supply side economics, based on free trade and globalization, was supposed to take place in the 80s and the 90s. Governments would leave economic activities and social progress thereof to private enterprise. Political leaders around the world championed it in their rhetoric but applied it in half. The applied part comprised tax cuts, privatization of national economies and removing international trade barriers. The ignored part of the supply-side theory was limitation of government spending – apparently because it doesn’t help politicians in elections. The problem the half-applied supply side economics created was governments’ spending money they didn’t make. The solution was finding the money through public debt (a.k.a. government bonds or treasuries). Following a rapid expansion of public debt, creditors accumulated significant bond portfolios they could repurpose. Globalization of trade turned into the globalization of finance in the nick of time. The globe was showered with credit that only become more and cheaper if governments would issue more bonds. They did.
You either lived a significant part of your life in a world of easy credit, or you were born into it. It wasn’t like how your parents had made a living once. The once assumed link between production and consumption was no longer relevant. Consumption was based on credit and was for all. Things were taken care of somehow, even though mainly by refinancing.
The credit expansion would have continued, but there was a limitation. Just like a person could find loans to the limit of his economic capacity, governments could find creditors for their bonds for the amounts their economies could comfortably support. Beyond that limit, creditors think the risk of not being paid is greater. They ask for more interest on the credit to compensate the risk. To a government, increased interest payments mean increasing taxes to levels that cripple national economies. It is not an applicable idea.
Quite a few national economies reached to their borrowing limits in recent past. They are now reluctant to increase public debt. While politicians feel the consequent pressure in elections, this also puts a hold on global credit expansion. Now loans are harder to refinance. And it will be even harder to do so. Complications that follow are significant.
On the one hand, you have your ambitions, skills, and plans for your education and career, as well as your expectations from the world as to what governments and institutions do, how people carry on, what you should do, what is fair, and so on. On the other hand, all there is uncertainty.
There could be a new world order like examples of the Bretton Woods regime and the supply-side-economics-in-half at some point. But it would not emerge until a nation or group of nations are in a position to set ground rules. Military conflict is very unlikely in this age, given the destructive capacity at hand. Nations could now get the upper hand through others’ economic failures. When and how that happens is unpredictable.