BOOM!
Just as TDB has been predicting, the Fed uses its 75point bazooka!
Fed Hikes 75 Basis Points; Powell Says 75 or 50 Likely in July
The Federal Reserve raised interest rates by 75 basis points — the biggest increase since 1994 — and Chair Jerome Powell signaled another big move next month, intensifying a fight to contain rampant inflation.
The Wall Street meltdown last week was a clear indication that the market didn’t believe the Fed when it claimed to have taken its bazooka off the table, the dynamics of capitalism at play forced a response which Adrian Orr must now take into consideration.
Will Orr’s bazooka come into play in the next OCR?
Surely it must!
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 6.9% inflation plus mortgage hikes caused by interest rates being forced up over the ocean of private debt is a fucking maelstrom of damage.
I argue we will face 10% inflation by December.
KiwiSaver accounts will diminish, mortgage rates and rents rise, food and petrol prices to continue to skyrocket as Russia’s war in the Ukraine and China’s zero tolerance to Covid combine to create a force multiplier of risk, economic shockwaves and inflationary pressures.
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 7% inflation, the ramifications of the true gravity from all that private debt becomes realised.
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.
We’ve seen a 50 point rise, and if Orr is going to use the Bazooka to any effect, especially in the light of the markets reaction to the Fed taking theirs off the table, it’s the next OCR that must be a possible 75 point or 100 point rise.
If Orr 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.
With the majority of mortgages being rewritten this year, people will be walking from historically low mortgage rates to steep jumps in monthly payments for a house suddenly losing value.
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 deep cultural recession and brutal self imposed lockdown.
Labour have been stung by the simple fact that their Covid response to date has enriched the wealthiest NZers by $1Trillion and this represents the largest transfer of wealth in NZs history.
The pittance Labour have given to the poor while pricing homeownership out of entire generations of Kiwis is causing electoral stresses.
Labour have plummeted in the Polls because the poor have lost faith in Jacinda’s transformative neokindness.
The broader Jacinda smiles, the more she tilts her head to one side and nods empathetically, the more those hurting economically feel betrayed as the costs of living crisis swallows their hopes for a better tomorrow up whole.
If Orr believes the Market must believe he’s serious, a 75 point increase must be on the cards, and the economic cost of that will cause many to snap.
Without some radical package to help everyone rebuild from this pandemic, the economic carnage will mutilate whatever survives.
Labour must look to new taxes aimed at the mega rich while removing the tax yoke from working class people!
Labour must then use that tax to fund universal services like:
- Free public transport
- Free school breakfasts and lunches
- Free internet at Maraes and Libraries
- Taking GST off fresh food and vegetables
- Free dental care
- More gastro bypass surgeries,
- Far more funding for Pharmac
- Lowering GST to 10%
- Making the first $20 000 tax free.
- 30% Government share holding in a new supermarket chain to smash the duopoly.
Let’s at least agree on the following, that when the enormous economic depression hits us, we refuse point blank to bail out the fucking banks!
Instead of bailing those greedy pricks out, we should protect first time home buyers by moving any mortgagee sales for owner occupiers over to KiwiBank and give it Government backing and rewrite the mortgages. You can’t wipe an entire generation of home owner who bought high in the market out because Free Market Global Capitalism is about to shit itself.
If you think things are hard economically now, you aren’t seeing what is about too hit us.
This is going to be another crisis and this Government with this Leader can stand up in moments of crisis. Universal provision of services from new taxes aimed at the mega rich is the only move left.
I do not believe that you are ready for this jelly.
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“enormous economic depression”
Thanks Martyn, too few people are calling this. We have a perfect storm of energy, food and fertiliser shortages (lower yields may leave 1B people short even if price were no issue). The end of Bretton Woods and collapsing globalisation, super bubbles or asset speculation, debt several times higher than the GFC, supply chain disruptions, developed nations facing demographic shift because of falling birthrates ending easy access to capital while trending towards more retired people and fewer tax payers. Topped off by a geopolitical reshuffle with conflicts and power struggles of collapse and opportunism.
This was baked in before covid-19 and Ukraine which are accelerants. The world before covid-19 is not coming back, here’s Tom with the weather.
https://www.youtube.com/watch?v=tGjuPJskNRE
The Jelly of Orr predicting 0.7% GDP growth but actually it shrank by 0.2%?
A little more of that and it’s actual stagflation.
I think we have discovered another useless woke idiot (Orr) too busy exploring Maori tree metaphors and not busy enough doing his job.
https://www.nzherald.co.nz/business/reserve-bank-governor-adrian-orr-shares-maori-perspectives-with-central-bankers/2GTV3TJRMUIDRYGHAS7YFEE3CA/
What a fucking patronizing embarrassment.
The Government is going to get a flogging for this.
Yep CCCO. And if I recall correctly… in last year’s Reserve Bank annual report, “climate change” got 3 x as many references as inflation. Guess what? Now we have inflation. Who would have thought?.
Collectively the big Aussie banks must have sucked over $50b in profits out of NZ over the last 10 years. It will take 5 minutes for them to cry poverty and doom and threaten mass evictions when the crunch comes. Will our government have the balls to support our people. Labour won’t. National won’t. And Act will just laugh at us.
And who game the liquidity to lend – Robber(tson) and Orr
Collectively the big Aussie banks must have sucked over $50b in profits out of NZ over the last 10 years. It will take 5 minutes for them to cry poverty and doom and threaten mass evictions when the crunch comes. Will our government have the balls to support our people. Labour won’t. National won’t. And Act will just laugh at us.
Universal provision of services from new taxes aimed at the mega rich is the only move left.
I’m reminded of this scene from The Dark Knight:
Lucius Fox:Now, let me get this straight. You think that your client, one of the wealthiest, most powerful men in the world … is secretly a vigilante who spends his nights beating criminals to a pulp
… and your plan is to blackmail this person?
Good luck
The reality of having student politicians and woke garbage in our public institutions is coming home to roost. This result shouldn’t surprise anyone that is financially literate unlike Liam Dann.
Frank Adrian Orr has a back ground in public and private and is not a student politician.
He is woke garbage wheel. The same day as New Zimbabwe was shown to be halfway towards Stagflation he was talking to central banking colleagues about Maori mythology.
That’s the problem for you isn’t it Frank. You could criticise his response as being too much like most other central banks in OECD but no it’s because he’s uttered the odd phrase in Te Reo. Like that makes a fucking difference
Universal provision of services from new taxes aimed at the mega rich is the only move left.
I’m reminded of this scene from The Dark Knight:
Lucius Fox:Now, let me get this straight. You think that your client, one of the wealthiest, most powerful men in the world … is secretly a vigilante who spends his nights beating criminals to a pulp
… and your plan is to blackmail this person?
Good luck
Aside from this, how many “mega-rich” people do we have in NZ that would provide enough tax revenue for all your fabulous plans? And of course what’s your definition of “mega-rich”, and how flexible will that have to be to meet your goals. My guess is very flexible, like second-house flexible.
Amazing. You Lefties never learn.
Sorry Martyn if people took on loads of debt in the middle of a pandemic why is that risk moved to other Taxpayers?
Also help me understand how moving a mortgage from one bank to another does not bail out the bank you just bought the debt off? I am trying to work out the logic in your solution
Yes, it’s important that any transfer of mortgages from failing banks not be conducted under normal policies. The foreign banks would use proxy bidders to drive up prices of mortgagee sales to rort taxpayers even more. If owners can’t keep up with the payments and would otherwise be subject to a mortgagee sale by a bank, the government should simply assess an appropriate, but not exorbitant price and seize the property for that. Nothing that will let the Aussie trash keep creaming it off our people.
If it’s someone’s family home then by all means transfer things to KiwiBank and adjust things properly. If it’s an investment property, there’s never been a better time to build the state housing stock by force.
yup wheel, why should I pay the gambling debts of speculators….
what is it rightards say ‘poverty is due to bad life choices’ well gander sauce goose.
.if the banks mass foreclose nationalise or compulsory purchase those properties/land for social housing.
there are policies it’s just that LINO is ideologically opposed to any solution/improvement.
When the economy tanks, which it already appears to be doing then Govt revenue will collapse as will everyone else’s so whilst taxing more may appear to be a solution it’s not.
The options are to borrow more as Key and English did after the Christchurch earthquake or to cut spending as there won’t be any income for either public or private.
Sadly, the chuckle brothers Adrian and Grant have blown the lot already so we are racing towards a harsh and brutal era of austerity and hardship.
Massive societal change is coming whether we want it or not.
What we need is a leader with a vision and ability to navigate through this tempest without destroying our communities. Any ideas who this might be as I’m stumped. The professional politicians and poll driven wombats we have on both sides of the house are venal and self interested clowns who are utterly clueless.
Martyn’s comments about Mr Seymour are on target and if he does take control then we are in for one hell of a wild ride.