BOOM! Coming in hot!
The US inflation blows out predictions…
US inflation hit 9.1% in June to put further pressure on Fed
Markets price in higher chance of 1% rate rise this month after bigger-than-expected jump in prices
…they were predicting 8.9% so 9.1% is way outside the top range.
Inflation is a sizzlin’ and pundits are now suggesting a 100 point basis rise by the Fed!
That puts enormous pressure on Adrian Orr and that pressure gets tested as early as next week when NZs inflation rates come through.
Even if inflation goes down, America is becoming a supernova, that has to have an impact on us whether we like it or not.
Add into this the next wave of Covid, new zero Covid restrictions shutting down supply chains again in China, a foot and mouth outbreak and the full impact of the war in Ukraine hitting base metal, food, gas, mineral and oil prices and Orr either gets ahead of this now or risks being avalanched
I’ve often talked about Orr’s 75 point Bazooka, a sudden lurch of a jump to tell the Market who is boss, but this 50point incrementalism could be creating longer term pain if the Market doesn’t believe the Reserve Bank is serious!
Could Orr dump the 75 basis point Bazooka and bring forward the mighty 100 basis point Taiaha?
If inflation blows out next week, he may well have to.
I don’t think people get how bad the economy is about to turn.
It is my considered opinion brothers and sisters, that we Comrades, are not in fact ready for this jelly.
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You’ve got to put in terms Orr and the reserve bank will understand, something like:
“The sacred tree of cash flow needs to shed its leaves and go dormant for winter “
Or
“Tane Mahuta needs less nitrogen fertilizer”
We are in such good hands.
It should be obvious that an increase in interest rates in the short to medium term anyway can do nothing but add to inflation. It’s just another cost to the production of everything. it can only be in the long term that the higher cost of a loan will deter businesses from borrowing when they have a choice, but in the present environment most loans will be for businesses in survival mode , not in expansion. The effect will be to increase debt, or where that does not seem viable to the bank then closure and a mass of bankrupts . This will soon turn to so many unpaid mortgages that banks will fail as prices plummet and forced sales don’t recover the balance owed.
It has been in the works from the beginning of QE to rescue the world economy (banking system) in2008. Every previous experiment the FED has made since to lift the base interest rate from near zero they have had to quickly reverse as the economy reacted. Now it seems they have decided to let nature take it’s course as it will have to some time and they own so much of the US economy now that QE has just about run out of things to buy.
Hang on to your hats!
D J S
Over the last years many bloggers on this site have rightly complained about the excess profit that banks have made but I have always said that people will not know real pain until banks fall over and people lose their deposits.
I am no great scholar but I did study the fall of banks in my studies for my banking diploma inthe UK. It can happen again
Lets hope we get to 2023 before they lose their deposits Trevor given Labour have implemented policy for deposits to be guaranteed. …
https://www.beehive.govt.nz/release/deposit-taking-measures-protect-financial-stability-and-new-zealanders
this nz deposit insurance has not yet been passed & on current estimate wont be implemented until 2024, another abysmal failure of successive NZ Gov’ts
https://www.rbnz.govt.nz/about-us/responsibility-and-accountability/our-legislation/proposed-deposit-takers-act/dta-questions-and-answers
Petrol is $3 a litre and price is supposed to indicate scarcity yet conservatives still deny peak oil theory.
The financial industry was literally invented to finance oil production and yet conservatives still deny peak oilis a thing.
I want the electrication of the motor pool and solar and clean water ways but The National Party of New Zealand just doesn’t want that.
Peak Oil isn’t a thing. It never has been. We’re still mining more oil than ever. Ill conceived sanctions on Russia (it’s all resulted in an “own goal” so far as opposed to hurting Russia) combined with global refinery shortages (e.g. we destroyed our refinery here in NZ for no reason) are why petrol prices are so high. Oil prices per barrel are under US$100, and they’ve been as high as ~US$150 a decade ago and petrol prices never went anywhere near as high as they now!
You mean like Sri Lanka Castro I don’t think so sounds highly exaggerated to me.
Diversify…should be any Government s catch cry. Export and energy sectors especially.
There is no doubt that our continued integration with unsound economies is going to put the hurt on our worst-off even more than is presently the case, and it’s not far off.
We shouldn’t be paying the NATO/existence of America tax.
We need a 2% rate hike in the next meeting to even start to combat these inflationary pressures (and end with a Volcker 10-15% interest rate to even begin to stop the bleed). As super pumped as all these central banks were to reduce rates to “stimulate the economy”, as reluctant they are to counter the inflationary disaster they created. More than likely it was all planned as part of enacting the (former conspiracy) “The Great Reset” by the WEF/Davos. They’re trying to burn it all to the ground to “build back better” (i.e. “you will own nothing and be happy” – an actual quote from the WEF).
Yep, The Great Reset or Build Back Better, its all just neoliberalism 2.0 or neoliberalism on steroids. Even greater riches for them and greater control over us. Welcome to the real new normal!
What? with the mountain of debt hanging over them? they can’t afford a 2% rate hike – it’s all a bluff – a reset won’t spare the WEF and they know it. it’ll be back to extend and pretend before long and having “to live with it”. Start digging the vegie garden and get that hybrid plugged in.
Access to government services is anti inflationary because increasing government spending increases the overall national income so there must not be any purge of the bureaucracy.
What ever happened to incorporating world’s best practices into corporate New Zealand? One answer is I guess it’s been replaced with critical race theory or critical economic theory that says there is no alternative to capitalism.
Lol or we could just crush all neoliberals, put Luxon and his ilk in a gulag, and have a functional economy.
Sri Lanka hit 110% inflation. Everyone needs to have a good look at that and understand why.
The world economy is tanking – inflation will be the least of our problems when demand sinks through the floor and the world is in recession – you won’t be able to give shit away soon because no one will be buying it at any price.
Marxists have been predicting global financial collapse for many decades, including Mike Treen and Dave Brown here, and me to some extent.
It will happen for multiple reasons including the tendency for the rate of profit to fall, growth and speed ups difficult to achieve, natural resources running low, and resurgence of organised labour–& inter imperialist wars of a very serious nature. But Capitalism is resilient, has control of armed state forces, media and intel, and workers in many countries abandoned collectivism long ago–becoming compliant consumers and precarious workers.
Idiots like Adrian Orr can only tinker at best.
But make no mistake if the shit hits the proverbial on a large scale new leaders will appear and many populations will enter into class struggle even if just to obtain the necessities of life if ATMs no longer work and the cash has disappeared.
New Zealand should survive total chaos longer than some countries due to distance, but COVID supply chain problems have given a taste of societal collapse.
Get a water tank, grow food, learn to fish with drones, trade with others, EV if you can afford one. Self sufficiency happens in the provinces but it will be tough for urbanites. Good luck–everyperson for themselves.
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