As TDB has been warning from the beginning, the economic shockwave of Covid is here driven by supply side inflation caused by just in time global capitalism grinding to a halt.
The knock on effect of 5% inflation plus mortgage hikes caused by interest rates being forced up over the ocean of private debt is a fucking maelstrom of damage.
Small business owners who have been alphas all their life and have grown attached to the liberty that liquid gives them are about to go belly up and that bitter resentment will feed ACT.
The poor are suffering beyond the financial fears of the middle classes, food banks are spiking 500% more demand and their overcrowded existence is ripe kindling for covid.
So can Orr’s bazooka help the economy as the real pain starts?
If all Orr has is a sudden jump in the interest rate to try and slow the almost 5% inflation, the ramifications of the true gravity from all that private debt becomes realized.
The problem as I see it is the inflation is being caused by unique supply side constrictions, so the only tool left is the ‘bazooka’, which Adrian Orr used last time with a .75 cut. If he needs to get ahead of a sudden spike in the cost of basics because ports are jammed solid it would need to be one enormous hand break.
And if he has to pull that hand break, we best hope there are airbags for everyone.
The steep rise in repaying the ocean of debt will suck money directly out of the pockets of people, many of whom are on the tipping point between functioning and desperate.
This leads to a plunge in consumer confidence, enormous financial pressures and the economy built on hospitality, tourism & retail withers as wave after wave of sickness and death trips the country back into a steep recession and brutal self imposed lockdown.
Without some radical package to help everyone rebuild from this pandemic, the economic carnage will mutilate whatever survives.
All of this was predictable and my only criticism of the Government’s response was the lesson we didn’t learn from the 2019 measles epidemic and that was the failings of their community outreach.
Maori and Pacifica health providers can reach communities that cracker DHBs can’t. When they are directly funded, public health goals can be achieved, that it’s taken so long to get them resourced is the main mistake and problem we have right now.
Otherwise, I applaud this Government’s desire to put people before money but taking that road means we have an obligation to help those damaged economically.
It’s time to think about taxation aimed at the wealthy, the banks and speculators to fund the rebuilding we need.
A financial transaction tax is that solution and Labour must consider it in a post Delta economy where Billionaires are flying to space on self funded rockets.
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