Harford said Kiwis should expect price increases.
“There are significant inflationary pressures building, as the cost of procurement and freight increase, and the cost of employing staff goes up.
“Around two-thirds of Retail NZ members expect to see prices increase over the next quarter.”
One of the great surprises in modern economics was that the avalanche of quantitative easing used to save the global economy from American Corporate bank greed in the 2008 financial meltdown didn’t create an explosion in hyper inflation in the day to day lives of ordinary people.
Because of the ease of global labour supply, wages didn’t increase, prices of goods stagnated, inflation disappeared but it did create the false conditions for the lowest interest rates in 5000 years, and saw all that quantitative easing balloon into speculative house and stock prices.
Covid has seen the main banks of the West sink trillions more into quantitive easing to deal with the economic whiplash the pandemic has created and in NZ we saw with the pumping of billions into the pockets of property speculators how our own house prices have skyrocketed.
This game of printing money to pump into property and stock market speculation to create a false illusion of wealth can continue playing as long as hyper inflation doesn’t overturn the apple cart.
But what happens if it does?
What happens if hyper inflation does suddenly explode out of nowhere?
To date all the inflationary pressures caused by this mass printing has led to driving up property prices and stock markets without touching the essentials and basics of life, but one of the impacts of Covid has been to shut down the global supply chains which is now creating scarcity of products that can’t get to market because they are bottlenecked at a Port.
This seems insanely dangerous because all those hyper inflation pressures will immediately jump to the very basics everyone uses.
Your Kiwisaver going up and your property value climbing is one thing, paying $15 for a loaf of bread and $20 for milk is completely another.
The ocean of debt the private and public sector have taken on is jaw dropping…
The world has never been more indebted after a year of battling Covid-19. And there’s even more borrowing ahead.
Governments, companies and households raised $24 trillion last year to offset the pandemic’s economic toll, bringing the global debt total to an all-time high of $281 trillion by the end of 2020, or more than 355% of global GDP, according to the Institute of International Finance. They may have little choice but to keep borrowing in 2021, said Washington-based director of sustainability research Emre Tiftik and economist Khadija Mahmood.
…now imagine a jump in hyper inflation kicked off by supply side dynamics, I’m no economist, but that looks like a bubble of unprecedented dimensions that would plunge the planet into mass economic turmoil.
If inflation starts, banks will have to lift interest rates on all that debt!
This looks less like a black swan and more like a black hole.
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