The last year has seen the biggest economic collapse in living memory.

The early stages of the crisis saw historic collapses in stock markets, and yet the remainder of the year saw the most powerful global rally in stock prices ever. The main US stock index finished 2021 15 percent higher that it started it, in spite of a 35 percent fall in February and March.

The inevitable collapse of the economy led many to predict a serious crash in the housing market, but what we actually saw was UK house prices reach new all-time record highs, with the fastest growth rate for six years.

UK GDP fell by the largest amount ever in recorded history. And yet the unemployment rate is barely half of what it was after the 2008 collapse.

Why has this crisis been so different to previous crises? Why were economic forecasts at the beginning of the year, about stock prices, about house prices, shown to be so totally wrong six months later? You will need to understand this if you want to understand what will come next.

The huge rises in asset prices last year were totally predictable, and indeed I did predict them in articles in last March and April. So why were so many other economists so wrong? The answer lies in a weak understanding of money, and how it has been used to resolve this crisis.

Normally, when faced with a crisis, a government will respond using money raised through taxation and borrowing. This crisis, however, has been handled in a very different way. In this crisis, nearly every penny that the government has utilised to support the economy, from the furlough scheme to Eat Out to Help Out, from self-employment support to business loans, has been funded by the Bank of England printing new money and, indirectly, lending it to the government. Not only that, but the amount of money lent by the Bank of England to the government has matched, almost exactly, the government deficit, in every month since the crisis began.

This is a very new way of dealing with a crisis (though students of history might also suggest a very old one), and, understandably, looks appealing. Using central bank printed money, a government can access huge amounts of funding without having to tax anyone or worry about financial markets demanding high interest rates on borrowing.

It very much seems like a free lunch, but it is not. It should come as no surprise to anyone that resolving the largest economic crisis in a century simply by printing £450 billion pounds (so far) comes with economic consequences. What should be surprising is how poorly most high-profile economists have foreseen what these consequences will be.

When you print large amounts of money, you do not, at first at least, have to worry about unemployment. That is because printed money can be used to replace the incomes of unemployed workers, as the furlough scheme has demonstrated. You also do not have to worry about the government debt. This is because the increases in the government debt are being funded entirely by the Bank of England simply printing the money, and the Bank of England is owned by the government.

What you do need to worry about is the fact that £450 billion extra, freshly printed pounds are being poured into the economy. That is a huge amount of money, nearly £10,000 per UK adult. If you, personally, are not £10,000 richer than you were at the start of the crisis, you should ask yourself, ‘who has my £10,000?’

All of the data, including data from the Bank of England itself, shows that there has been a huge increase in the cash savings of individuals during the Covid crisis. This was not only predictable, but was in fact an accounting certainty once the government and central bank decided to inject £450 billion newly printed pounds into the economy. The data also shows that this money is largely sitting in the bank accounts of wealthier individuals.

What we are experiencing here is a new method of dealing with economic crises whereby, rather than taxing the richest to help resolve problems, the government and central bank instead do the opposite: inject money into their bank accounts until the problem resolves itself.

Under this topsy-turvy dynamic, we will get topsy-turvy outcomes. The worse the economy is, the more money will be injected into the bank accounts of the rich. Since the rich tend to use their money to buy assets, this means that the worse the economy is, the more we can expect stock and house prices to rise. When the systemic response to an economic crisis is printing money that ends up with rich people, this is a totally predictable response.

And yet economists still describe this reality very badly. They report the government debt as a serious problem (it isn’t), and stock and house price rises as signs of a recovery (they’re not).

We must prepare for the reality of what is coming: an economy that is woefully weak for working people while house and stock prices continue to balloon. The next phase of this pandemic will bring a bonanza for the richest while the poorest struggle to find work. It is already happening. These problems can only be resolved if we start to tax the wealthiest people to resolve crises, instead of paying them.

If the economists that run our central banks and government refuse to do that, then they should not be surprised at the enormous increase of inequality that will result. And neither should we.