Here comes stagflation – why Orr has no choice but a 100 point rise despite slowing US inflation
World Bank: Here’s what it will take to spark a global recession
Any adverse development hitting the world economy – such as higher than expected inflation, abrupt rises in interest rates to battle it, a resurgence of Covid-19 or rising geopolitical tensions – could put the global economy into recession this year, the World Bank has warned.
It said it would be the first time in more than 80 years that there had been two global recessions within a decade.
It has released its latest Global Economic Prospects report, which says the global economy will grow by 1.7% this year and 2.7% next.
The sharp downturn in growth is expected to be widespread, with forecasts in 2023 revised down for 95% of advanced economies and nearly 70% of emerging market and developing economies.
I think we are in a unique crisis of Capitalism.
I think the $25Trillion Central Banks printed to fend of the 2008 Global Financial Recession (thanks to the naked greed of Transnational Banks) didn’t become inflationary because Transnational Corporations moved their Just-In-Time supply chains to China and that lowered the base cost of manufacturing.
The problem is that Covid shut down those supply chains forcing Corporations to move to Just-In-Case Supply chains which import inflation.
The recent drop in US inflation was in part driven by Biden tapping the US Strategic Petroleum Reserve (SPR) by 15 million barrels at a time when the SPR is at its lowest reserves of 450million barrels. If Russia suspends their oil because of the attempt by America and the EU to cap the cost of a Russian barrel of oil to $60 by refusing insurance on any tanker carrying Russian oil, that would see a removal of up to 700 000 barrels a day.
If America gets hits by a bad Hurricane season and are forced to use the SPR at a time when Russia is cutting their supply, that inflation rate is going to jump again.
This is why Putin is considering lifting taxes because he’s preparing for a hit on oil when he goes through with his threat in March to suspend Russian oil sales.
While inflation is slowing in the US, thanks to decreasing petrol prices, the core inflation for food is still going up. Inflation has been slowed, it certainly hasn’t been tamed but it has been slowed by oil levers that are not without intense vulnerability.
In NZ, the Government has the exact same problem with their $25cent reduction on the petrol tax.
Orr has no choice but to use a 100 post rise in February, despite the intense depression and Armageddon level reading of todays mood of the economy…
‘Worst of all worlds’: Why business confidence survey suggests recession ‘faster, deeper’
The latest quarterly survey of business opinion from the New Zealand Institute of Economic Research is “the worst of all worlds”, BNZ says.
It suggested profits were “collapsing” and hiring intentions were down, but that costs pressures for businesses remained extremely elevated, the difficulty in finding labour is extreme and their expectations of price rises are as high as ever, the bank said in a research note.
“It’s all starting to look like stagflation on steroids.
“There is no sign inflation is abating in any meaningful way, yet the survey adds more weight to our long-held argument that the economy is headed for recession. Moreover, that recession could come faster, and be much deeper, than many care to believe.”
…inflation has not been tamed, there are intense geopolitical shockwaves hitting us that could exacerbate things dangerously and the ever threatening extreme climate events are going to unravel things even further.
50% of those on a floating mortgage in NZ will be walking off 3.5% into 7% rates. That’s an extra $400 PER WEEK that first time home owners will need to find.
I don’t think that level of distortion to peoples take home pay is sustainable and the real possibility (as I have been pointing out) is stagflation.
All we’ve done is pacify inflation for a quarter, at any point in can erupt back into life meaning all the capital Reserve Bank Governors have burnt to get this level of credibility with the market will be wasted.
The millisecond Orr blinks the Market will exploit him.
If Orr comes in with a 100 point rise, the Market have to believe him, while the 125 000 people he’s about to sacrifice on the altar of Economic Theology will want to know why an unelected Technocrat is fucking up their lives.
The black swans aren’t just circling, they’re in an Uber on the way.
This recession will quickly start feeling like a crisis.
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Biden tapped into the strategic reserve just to get through the midterm elections.
So only now the wheels come off the bus.
Just like Jerome Powell, the problem for Orr is that he is nowhere near positive real rates.
He’s only at 4.25%. With the next C.P.I. print forecast to come in at 7.7%, he’d have to hike all the way past 9.0%.
If he does this, there will be mass defaults: too many debtors are technically insolvent, and will go bust if rates are truly normalised.
He is more likely to do what Powell will also be forced to do: let inflation run hot, and inflate away the debt.
A disaster for real wages, which will not keep up with this depreciation of the currency.
A much smarter option would be a jubilee, plus a currency reset: print enough dollars to buy all the debt (which is unpayable anyway), write it all off, limit the currency supply, then make it fully backed by gold (and reopen the gold window).
The GOP led House is threatening to cut of supply if Biden does not agree to cuts to Social Security, Medicare and Medicaid. Biden could use that as an excuse to do something revolutionary.
Higher debt costs impact on government budget financing – maybe its time for government to finance itself with debt free money. I’d use digital money to finance government and leave the existing monetary system intact otherwise (tightening it to account for the money created free of debt for government use). And yeah one could use it to pay off existing debt, or a more moderate alternative just enough to cover the cost of public debt each year.
The prospect of such an option might just scare off the GOP …
A jubilee! Yes Ned Kelly please tell Grant Robertson to arrange for my mortgage to ripped up. Absolutely in support of this. Thanks
So, do I buy that new lounge suite at harvey normans on 3 years interest free or do I get some chickens, dig up the lawn for a vege garden and cancel Netflix.
Don’t cancel Netflix would be my advise.
There is always the GOP caucus threatening to move the US into a debt default scenario to lower the value of their currency and reduce the need for us to increase the OCR to protect the NZ dollar value.
Too easy to get illegal workers specifically into NZ on $3 per hour while saying it is $15.50 per hour which is still less than minimum wages which is encouraging inflation in goods and accomodation while depressing the wages.
Woman came to NZ expecting $15.50 an hour, but got $135 for a week’s work, jury hears
https://www.stuff.co.nz/national/300785629/woman-came-to-nz-expecting-1550-an-hour-but-got-135-for-a-weeks-work-jury-hears
Should be prison for anybody doing this (deportation after if they are dual residents) and their assets seized and arrested for people trafficking. Too many profiting from the small fines and blind eyes to the practise of low paid illegal workers.
Local applicants applying for these seasonal, vineyard jobs are rejected because they are too expensive, and then they give up on applying for more genuine jobs.
It’s a joke, people come, get deported and then just change identities and come back! The big fines should be for the people giving out the visas, giving them advice/supplying work here about the visas and providing them jobs with out appropriate visas.
Many rich off this – why have a real job when you can get $30k payments and make the third world work for next to nothing in NZ with no taxes!
Auckland building boss charged with fraud after investigation into illegal labour
https://www.nzherald.co.nz/business/auckland-building-boss-charged-with-fraud-after-investigation-into-illegal-labour/GXAPRJOGDSR2LVQDS4ZZ66JRUI/?c_id=3&objectid=12005146
Even when workers are killed, nobody prosecuted and the worker families profit from ACC that they never paid, so that encourages more to come to NZ as we are such a soft touch for this practise – meanwhile if a genuine NZ company has a workplace accident they are prosecuted to the hilt and go out of business!
“Should be prison for anybody doing this (deportation after if they are dual residents) and their assets seized and arrested for people trafficking. Too many profiting from the small fines and blind eyes to the practise of low paid illegal workers.”
It’s been going on for years @SaveNZ – accelerated with the creation of that Stevie Joyce/Jonathan Coleman bugger’s muddle called MBIE – the Ministry for Everything.
It’s only really recently that the Labour Expectorant got off its chuff and started doing something – as pathetic as it is.
You’d have thunk it’d be a priority for someone like Michael Wood. So far not so much.
Lil ‘ole NuZull that punches above its weight has created a shitload of misery for genuine immigrants, and enabled – even encouraged this sort of shit.
It seems the harder the likes of Matt McCarten/ Anu Kaloti/ McClymont and a few others fight for justice, the harder the current crop of the polly class and senior and muddle management bureaucrats push back. (They always know best and are never wrong, despite ‘misspeaks’, unintended consequences and sheer stupidity)
A short sharp shock may well be in order as New Zealand real estate, especially residential properties, are overpriced and it has been this way ever since the global financial crisis of 2008. We’ve only had minor slumps in property values since then.
100 points!
Time to back up the truck for the bond market bargains!