What if ‘Economic Experts’ proclaiming transitory inflation are wrong? What if we have Stagflation?
Ouch. Eurozone inflation explodes…
Euro zone inflation soars past forecasts to new record high of 10.7 percent
Euro zone inflation surged past expectations yet again this month to hit a record high, pointing to further interest rate hikes from the European Central Bank as price pressures appear to be broadening.
Consumer price growth in the 19 countries sharing the euro accelerated to 10.7 percent in October from 9.9 percent a month earlier, beating expectations in a Reuters poll for 10.2 percent as inflation in Germany, Italy and France all rose more than forecast, data from Eurostat, showed on Monday.
…Adrian Orr has kindly explained that he needs to burn New Zealand to save New Zealand…
Adrian Orr: Beating inflation will mean higher unemployment
“Of critical importance to overall financial stability will be the robustness of the labour market.”
Orr warned that the interest rate hikes needed to beat inflation would mean higher unemployment.
“Returning to low inflation will, in the near-term, constrain employment growth and lead to a rise in unemployment,” he said.
“The actual extent of this trade-off remains unclear, however, given the significant labour shortages globally and the very different means of employment being adopted post-Covid.”
“Importantly, it is highly unlikely that we are at maximum sustainable employment if inflation is still high and variable,” he said.
…cough.
What if he’s wrong?
I don’t mean about needing to destroy jobs and raise unemployment rates by rapidly lifting the OCR, oh he’s going to do that, he’s clearly telling the well heeled part of town that he intends to keep raising the OCR and that he is openly accepting the collateral damage of job loses…
An independent economist has warned thousands of Kiwis will need to lose their jobs as part of an “economic trade-off” to get inflation under control.
Statistics NZ will release the latest Labour market statistics for the September quarter on Wednesday, with most economists expecting them to show an unemployment rate of 3.2 percent – compared with 3.3 percent in the June quarter.
Meanwhile, annual inflation is currently sitting at 7.2 percent 0 down slightly from its June peak of 7.3 percent but significantly higher than the Reserve Bank of New Zealand’s (RBNZ) 1 to 3 percent target.
…I mean what if he’s wrong about why inflation is going up and is giving the economy the wrong medicine?
The argument is that if the OCR rises, inflation will fall because jobs will be lost and those losing jobs stop spending while sapping disposable cash from mortgage holders, thus demand is allowed to ease which is supposed to lower prices.
So far, so Keynesian.
But what if this is a unique moment of crisis in Capitalism?
What if there is a price to pay for printing $25Trillion and artificially lowering the interest rate to the lowest rate in 5000 years?
What if that tsunami of inflation was distributed to the deepest, darkest most de-unionised supply chains in China and that Covid and geopolitical tensions have broken free market just-in-time supply chains to just-in-case supply chains which sharply import inflation?
What happens if job losses explode AND inflation continues to climb?
What happens if this is stagflation and not a transitory inflation spike?
What if the global supply chains that have kept the tsunami of hyper inflationary pressures away from the West have actually ruptured?
What if all the Keynesian macro economic advice is worthless because of the extreme global debt and sudden importing of inflation back to the West eradicates all that previous inflation suppression?
What if lowered demand still sees prices climb because there is a tectonic realignment in supply chains?
What if Orr’s medicine can’t cure the symptoms because he’s misreading the disease?
If unemployment starts going up while inflation also goes up, we are trapped in massive unstable speculative bubble that has all the potential of a 1929 crash followed by war.
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The main stream economists are wrong alright, because of their narrow focus. Unemployment must rise for inflation to fall? No, no and no! What is the point of running an economy if not to serve the citizens.
“Trickledown” has been dead for a long time but you would not know it listening to these “experts” whose main task in life seems to be performing anilingus on 1ers%.
Many price rises are down to pure corporate profit gouging, as well as collapsed supply lines and COVID fall out. Even that radical Joe Biden has called out the fossil fuel companies recently on that score.
Still, in the short term, keep some cash and bottled water handy, and get one of those emergency radios with a crank handle!
Economists say that inflation is purely a monetary problem. Too much money chasing too few goods. The basis of Milton Friedman’s ideology. Economists wrong again. Commerce always uses the cheapest and easiest resources to exploit. That means that later on the resources cost more energy to extract, process, and sell. So there is a increasing real cost to obtain the goods. As the wealth trickles upwards to the already wealthy, the rest face the reality of increasing costs as inflation. The energy we obtain in food now costs 10 times the energy to supply. It will get worse before it gets better. Who says it will get better?
No what if about it! Any politician or economist that said inflation was going to be a transitory of 2022 were very wrong. This call can already be made in late 2022. Inflation is not falling and is stubbornly averaging somewhere in the 7-9% pa region as I write. Robertson and Orr were staggeringly wrong with their predictions in early 2022. A recession now looks inevitable.
For just the USA, not counting Europe Australasia Japan India and China all-in money printing totalled $13 trillion: $5.2 for COVID + $4.5 for quantitative easing. All those trillions have to be stolen back from the population sometime – now is the time. The left in NZ need to be talking up the necessity of massive public works for job creation to see us through the coming depression
And putting great distance between us and the coming war with China. Thank God there are still sane people in China who are not ready to be trapped into a war by Pelosi provocations.
We need double digit interest rates if there is to be any chance to break the current inflationary spiral. The issue now is people are demanding more money to buy the very good they’re making/selling, increasing costs for the business they’re working for and forcing them to increase prices to compensate (the “living wage” is a disastrously inflationary policy for this very reason). Further, when interest rates are lower than inflation, it’s a no-brainer to borrow to buy a good today, if you know it will be more expensive tomorrow (even after interest). Inflation is very much like a rolling snowball. It can be stopped, but only if the government (by completely stopping deficit spending) and the central bank (by raising interest rates to a level where people stop borrowing and start saving) are willing to make it happen.
Agreed the woke don’t have resilience to stand what could be coming.
I have seen talk from some corners of this thing turning into a true economic depression. Did not believe them but reading this has me .
We are in for interesting times ahead.
So let me get this straight. There are no people to fill jobs supposedly. In order to control inflation we apparently need more unemployed. Meanwhile everyone is screaming for the immigration gates to open for all manner of people, while we are trying create unemployment. Awesome.
So if we need more unemployment to sort the things out do they start with Governors of the reserve bank and economists?
Great image for an illusory theory, all effect but no truth in it.
However a bit of good news – who’d have thunk it.
https://www.rnz.co.nz/news/business/477886/unilever-sees-revenue-grow-despite-staff-reducing-time-on-the-job
A four-day work week trial run by Unilever over the past 18 months has been a huge success and is being expanded to Australia.
The company’s 80-strong New Zealand workforce were allowed to spend 20 percent less time at work while retaining full wages.
As a result the company saw a growth in revenue, absenteeism dropped by 34 percent, and stress dropped by a third. Work/ life conflict – the way a job impacts on personal life – fell by 67 percent.
Will Luxon skite, reflected glory – he was from Unilever wasn’t he? Unilever, a little device for getting under the edges of lids to open up a can so you can get at the goodies!?