Prices rose 0.8 per cent in the three months to the end of March.
The quarterly inflation figure reported by Stats NZ was up from 0.5 per cent in the December quarter and in line with banks’ expectations, but shy of the Reserve Bank’s 1 per cent forecast.
It leaves annual inflation marginally higher at 1.5 per cent, versus 1.4 per cent for the year to the end of December.
That small change appears unlikely to settle growing debate over whether rising prices could knock the Reserve Bank and other central banks around the world off course later this year in their general intent to keep interest rates “lower for longer”.
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?
Household living costs rose 0.8 percent in the March 2021 quarter, the latest Statistics New Zealand Consumer Price Index survey shows.
Consumer prices are on their way up, as petrol, transport and rent are becoming more expensive.
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.
To date the cost rises have been in things poor people have to pay, transport, rent and gas. That means food will be cut, hungry people get angry quickly.
There are already arson attacks on Landlords…
A resident of a street where an empty house went up in flames on Saturday morning thinks someone angry about the housing crisis could be to blame.
…after every great pandemic throughout history, the peasant revolt in the 1300s, the London riots of the 1600s and the social unrest right after the Influenza pandemic of 1918, society always goes through intense social change brought on by the economic collapse lockdowns generate.
If the bottlenecks of supply chains are blocked unleashing a tsunami of hyper inflation on the goods everyone requires for life, Central Banks will have no choice but to lift inflation rates to desperately attempt to curtail that hyper inflation, which of course will mean the ocean of low interest debt that has been created to fuel hyper speculation will suddenly start feeling the true gravity of trillions in borrowing.
Experts are tipping rising oil prices and cargo disruptions will soon lead to higher prices and inflation.
And that could result in higher interest rates for borrowers, says Felix Fok of Milford Asset Management.
“It’s almost certainly coming… I think some of it is already here,” he told The AM Show on Thursday. “There have been stories written about the costs of second-hand cars in New Zealand going up, for example.”
I’m no economist or financial guru, but it seems the basic laws of capitalism’s supply and demand will unleash a terrible tsunami of hyper inflation that the Global Reserve Banks will struggle to contain in any other way than to allow stock markets and house prices to shatter and crash by forcing interest rates back up.
Now if a vaccine can reach the 75% herd immunity threshold, those supply chains will reopen, but if we don’t gain that herd immunity, quarantine will continue to force those supply chains closed and the prices of scarce ordinary goods will start to dangerously inflate.
I fear all our Black Swans are coming home to roost in 2021.
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