Inflation

[over9k]

No don't remember. give us a clue

This post:

Well it's not about being recession proof so much as it is how much the rate rises pummel inflation vs pummel the economy. Rate rises obviously cannot contract inflation without also contracting growth but how balanced those contractions are depends on the economy. The yanks have the best balance referece rate rises pummeling inflation without the economy going to hell in a handbasket as well. Other countries are overwhelmingly tipped in the other direction. If rate rises have a much higher proportionate effect on inflation vs economic growth for the americans than other countries then this makes the U.S economy far better able to weather said rate rises (pummel inflation) without tipping into recession.

The other thing to keep in mind is the demand vs supply side of the equation. Pumping rates overwhelmingly hits the demand side. But what do you do if your demand side is already going anyway? Or if it's a supply side problem?

Comparing USA vs europe is an easy one to show with this because europe imposed a whole mountain of sanctions (cut off their supply of) russian oil that the yanks just didn't on account of the U.S not really being supplied with russian oil in the first place.

This gives europe a supply side restriction of the equation that must be balanced by restricting the demand side as well. The U.S does not have this problem - the equation is not unbalanced by russian oil sanctions because they were never being supplied with russian oil to begin with.

This is just one of many factors that enable the U.S economy to weather rate rises far better than, say, europe. There's a whole stack of others (demographics and labour supply being a huge one) but I probably don't need to write everyone a novel for them to get the point.



Neither. They're soon going to be stuck between a rock and a very hard place. Immigration is the *only* thing keeping quite a lot of economies growing/going now.

Aus is a very easy example of this - if this country depends so much on china, and china's going to hell in a handbasket, a substitute must be found or a new economic model must be adopted. Those are the only two options.



With you on this too, but what's going to give? Are we going to hit nasty recession(s) and they just let inflation run rampant in response?

There is no easy way out here.



Depends who's in power and which way the political winds are blowing. Fact is that central bank governors are appointed by politicians.



See I think it's the opposite of this bottle - jerome powell seems to be the only one really really pushing the "we're going to pummel inflation no matter what" narrative.

With the exception of NZ, all the others seem extremely hesitant to give their economies the exact painful medicine they need.

Are they perhaps all too aware of what it will mean (reference recession) if they do?


Are you asking me in a literal/economic sense or in a political sense?

Why we can/can't do something economically is a very different question than why we can/can't do it politically.

 

[over9k]

And the ECB cuts!

Europe's decided to let inflation run hot rather than tip into recession.

Both exactly as predicted.

 

[over9k]

ECB now flatly stating that their inflation view has been "boosted".

So yeah. Letting it run hot rather than go into recession etc.

Edit: Now on record raising 2024-2025 inflation forecasts. Still cutting rates anyway.


Admission that they've had to choose recession vs inflation and they've gone for hot inflation.

 

[moXJO]

And the ECB cuts!

Europe's decided to let inflation run hot rather than tip into recession.

Both exactly as predicted.

Didn't look back through the thread. But your thoughts on the situation with the "petrodollar" and Saudi not renewing specifically with the $US

 

[sptrawler]

Well looks like the middle class is an endangered species in Australia. It's a very informative article.
It kind of reminds us of a time when the State Governments had State Housing commissions, that actually employed tradesmen and apprentices and built houses, before politicians outsourced it to the private sector and immigration.

Housing is 'impossibly unaffordable' in Sydney, Melbourne and Adelaide, and 'severely unaffordable' elsewhere

A study ranking nearly 100 cities in eight countries places Sydney, Melbourne, Brisbane, Adelaide and Perth among the world's least affordable cities to buy a home.

www.abc.net.au

• In short: Australian capitals rank among the world's most unaffordable markets for middle-income buyers.
• The study compared housing markets in 94 cities across eight countries, and nearly all Australian capitals ranked in the lowest 25 per cent for affordability.
• What's next? The study points to policies that free up land for development as key drivers of more affordable housing.

Nearly all of Australia's major capitals rank in the top 25 per cent least affordable markets for middle-income home buyers, according to a survey by United States academics.

The Chapman University Frontier Centre for Public Policy's Demographia International Housing Affordability report focuses on the ability of "median income" households to purchase median-priced homes.

To compare different markets within a country and across the world, it uses a metric called the "median multiple", a ratio of median incomes to median house prices.

Using that criteria, Hong Kong, Sydney and Vancouver are the most unaffordable markets for those buyers.

While the US cities Pittsburgh, Rochester and St Louis are the most affordable.

The survey includes housing markets in Australia, Canada, Hong Kong, Ireland, New Zealand, Singapore, United Kingdom and the United States.

Sydney, Melbourne, Adelaide, Brisbane and Perth all sit in the least affordable 25 per cent of cities in the list of 94 markets included in the study.

Singaporean success​

The study highlights the Singaporean government's ability to turn from a "desperate housing situation" in the 1960s to one of the most affordable markets in the report.

"[Singapore was] characterised by unhygienic slums and crowded squatter settlements.

"To address this, Singapore established the Housing and Development Board (HDB), which adopted policies to encourage a property-owning democracy in Singapore and to enable Singapore's citizens in the lower-middle-income group to own their own homes."

Now, over 90 per cent of Singaporean citizens own their own homes, and nearly all of them live in HBD housing.

Last year, Prime Minster Lee Hsien Loon reiterated the government's commitment to high-quality public housing.

"We must still ensure public housing is accessible and affordable for Singaporeans of all income groups. We must also keep our housing schemes fair and inclusive for all.

"This is how we keep our national housing story going strong for current and future generations."

 

[divs4ever]

Well looks like the middle class is an endangered species in Australia.

a standard strategy

the middle-class are not rich ( and powerful ) enough to buy or blackmail the levers of power , nor desperate enough to risk all in a total revolution so are always the meat in the sandwich ( the poor cannot be crushed , they get work done and buy the over-priced product , ie you revert to interpersonal barter )

now the real danger is when the middle-class gets crushed , they provide the experience and insight needed to make the revolution efficient and effective ( and you end up with genuine communism .. all the survivors end up with virtually nothing and have to re-organize/rebuild )

but the ultra-wealthy plan to hide ( in luxury ) in very deep bunkers , for maybe a couple of decades ( since fortresses in space aren't going to plan )

 

[Smurf1976]

the situation with the "petrodollar" and Saudi not renewing specifically with the $US

Sounds like another step toward the inevitable to me.

Of itself well it's just a step. But it is another step and by no means the only one.

 

[divs4ever]

Sounds like another step toward the inevitable to me.

Of itself well it's just a step. But it is another step and by no means the only one.

more importantly , will the Saudis buy more ( or any ) US debt

yes, anyone not totally servile to the US system must be very worried about sanctions and asset seizures

but yes just one more step in a long journey

 

[over9k]

Well looks like the middle class is an endangered species in Australia.

There's actually a metric, the "gini coefficient", which is an exponential function, that can then be plotted onto a graph to become what's called a "lorenz curve" to demonstrate this.

It's a little difficult to read but it's a cumulative curve, meaning that the Y axis (vertical) shows percentage of income that has been tallied and the X axis (the horizontal) the percentage of the population that has been tallied. So you start with the bottom 1% of incomes and see what percentage of the nation's income has been tallied, then the bottom 2%, then the bottom 3%, so on and so forth, so a perfectly equal society would result in a 45 degree line rather than a curve.

Now we've never lived in a perfectly equal society so there's always been a bit of a curve to it but what's been happening for decades is that the curve has been turning into more and more and more of a right angle - you tally up, say, the bottom 30% or 50% or 70% or whatever incomes and you keep seeing less and less and less of the total tallied. Instead, you have to keep getting further and further and further and further up the income percentages before the total tallied starts to really increase.

Graphically, it looks like this:



It's labelled back to front, the yellow line is where things used to be and the black one is the direction they keep heading in, but you get the point - we can actually graphically demonstrate how the middle is being hollowed out in a literal sense as the curve keeps becoming more of a "nothing, nothing, nothing, nothing, nothing, nothing, nothing, EVERYTHING" type of distribution (i.e a right angle).

So there you go, there's a little fun fact (or, handy tool if you're ever in an argument with someone) to use should the need arise

 

[over9k]

Didn't look back through the thread. But your thoughts on the situation with the "petrodollar" and Saudi not renewing specifically with the $US

Trying to get out from under their thumb - before it was a carrot & stick arrangement but with the yanks no longer providing the carrot (the security umbrella) there's no point in continuing to cop the stick.

This wasn't set in motion last week: https://en.wikipedia.org/wiki/2017_United_States–Saudi_Arabia_arms_deal

The rest of the world used to piggyback off the americans securing their own oil supply but with the yanks no longer needing to do that thanks to shale oil the rest of the world's had to begin preparing to take care of itself for the first time in decades.

Saudi-usa have only ever been friends of convenience so catching more flies with honey was never going to work here. Al qaeda and bin laden were a saudi funded terror group that they lost control of remember.

It's not common knowledge (because it wasn't so publicised/social media didn't exist then) but the saudi's very nearly got themselves invaded iraq-style (invade, take over, kill the bastards in charge and then replace them with someone we like) over 9/11. The plans were drawn up & everything.

 

[Smurf1976]

The rest of the world used to piggyback off the americans securing their own oil supply but with the yanks no longer needing to do that thanks to shale oil the rest of the world's had to begin preparing to take care of itself for the first time in decades.

As I see it, this is the big issue here.

Broadly speaking I'm seeing an "axis" that involves China as consumer and various others as suppliers. So in other words, China securing its future oil needs and effectively taking that oil off the market, meanwhile the US does the same albeit internally.

That leaves other countries needing to import oil squabbling over whatever supply hasn't been locked up by China or US. So plausibly an abundance of oil in those two countries, shortages, price hikes and so on for the rest at some point.

 

[over9k]

As I see it, this is the big issue here.

Broadly speaking I'm seeing an "axis" that involves China as consumer and various others as suppliers. So in other words, China securing its future oil needs and effectively taking that oil off the market, meanwhile the US does the same albeit internally.

That leaves other countries needing to import oil squabbling over whatever supply hasn't been locked up by China or US. So plausibly an abundance of oil in those two countries, shortages, price hikes and so on for the rest at some point.

The problem is that you/they have an entire region of people that basically just all hate each other. It wouldn't (won't) take much to kick off some wars/squabbling, hence everyone now in the process of building their navies out.

In the past, every time someone even thought about upsetting the apple cart the americans would just sail a carrier past and let them know to not even think about it:



So if the yanks aren't going to provide the security/stability umbrella for the region then obviously everyone else will either have to start doing it themselves or find an alternative source of oil.

You've basically got three major suppliers: russia, usa, middle-east. The first has europe by the balls and the europeans know it, the second would be reliable but you're absolutely f***ed if they decide to stop selling it to you (just ask japan in ww2) so it's risky, and the third requires a massive amount of naval power projection to ensure the supply of.

The only alternative source is africa and you'd have to essentially go neo-colonial to get that, it would require invading wherever the oil is and then building all the facilities, all the drilling, from scratch, and then a huge military presence to secure it. You could onshore your refinement at home but you've still got to get the stuff out of the ground and get it to your country so even ignoring the morality of the exercise it would still be, shall we say, very difficult to pull off.

Aside from that you start talking offshore oil rigs which can be done but are way way way more expensive/difficult/dangerous than drilling on land. Drilling several miles into the seabed from atop an offshore platform with things below the surface approaching 5,000 atmospheres of pressure is as difficult and dangerous as it sounds.

So it appears that the world is currently going for option 3.

 

[qldfrog]

The problem is that you/they have an entire region of people that basically just all hate each other. It wouldn't (won't) take much to kick off some wars/squabbling, hence everyone now in the process of building their navies out.

In the past, every time someone even thought about upsetting the apple cart the americans would just sail a carrier past and let them know to not even think about it:

View attachment 178626

So if the yanks aren't going to provide the security/stability umbrella for the region then obviously everyone else will either have to start doing it themselves or find an alternative source of oil.

You've basically got three major suppliers: russia, usa, middle-east. The first has europe by the balls and the europeans know it, the second would be reliable but you're absolutely f***ed if they decide to stop selling it to you (just ask japan in ww2) so it's risky, and the third requires a massive amount of naval power projection to ensure the supply of.

The only alternative source is africa and you'd have to essentially go neo-colonial to get that, it would require invading wherever the oil is and then building all the facilities, all the drilling, from scratch, and then a huge military presence to secure it. You could onshore your refinement at home but you've still got to get the stuff out of the ground and get it to your country so even ignoring the morality of the exercise it would still be, shall we say, very difficult to pull off.

Aside from that you start talking offshore oil rigs which can be done but are way way way more expensive/difficult/dangerous than drilling on land. Drilling several miles into the seabed from atop an offshore platform with things below the surface approaching 5,000 atmospheres of pressure is as difficult and dangerous as it sounds.

So it appears that the world is currently going for option 3.

Or you adopt the policies we had with the US of A in the past with the new Big Guy and are allowed to get his crumbs by falling in its sphere
The US is out..but a good strategy for Canada, maybe Mexico ..and that's it for the core.
The EU is disillusional relying on the US gas carriers imho and is now utterly fxcked.
Russia: too far, and is now turned into India/China + Stans the EU dream that if/once Putin is gone, they will join again...in their dream
And then China:
Like Thailand,SE Asia, you join the BRICS, and deal with the new kid in the block..but that means alliance, collaboration and not nukes and submarines, cold war...
So Korea, Japan..and Australia find themselves joining the EU in the "We are screwed camp."
Japan after the oil crisis of the 70s went nuclear plus purchased coal mines in Australia: BMA..
What will we do?
Ohhhh I know hope it is sunny and windy for 10- 15y.. And then what?

 

[over9k]

Yeah well thanks to the tree huggers producing energy in a lot of parts of the world has all but become illegal.

NZ for example apparently has massive offshore reserves but has literally banned drilling into them.

 

[over9k]

Meanwhile:

 

[JohnDe]

Oil has not turned into the crisis issue that past predictors have advertised for the past 50 years.

Technology always comes through for us. New ways and means to extract carbon fuels thought impossible or nonexistent, improved fuel efficiency technology, new and improved fuel types such as electrical motors and energy capture. These have helped reduce oil usage for transport and redirect excess to industrial use, which in turn has had technological breakouts such as new materials and efficiencies.

On top of that we have rogue countries like Russia selling cheap, and the Chinese economy slowing down and using less.

Interesting times we live in.

 

[divs4ever]

As I see it, this is the big issue here.

Broadly speaking I'm seeing an "axis" that involves China as consumer and various others as suppliers. So in other words, China securing its future oil needs and effectively taking that oil off the market, meanwhile the US does the same albeit internally.

That leaves other countries needing to import oil squabbling over whatever supply hasn't been locked up by China or US. So plausibly an abundance of oil in those two countries, shortages, price hikes and so on for the rest at some point.

that sounds like a fair summary to me ,

one point over-looked is the direction of finance away from fossil fuel exploration and development ( which will hurt non-BRICS nations )

 

[Smurf1976]

Oil has not turned into the crisis issue that past predictors have advertised for the past 50 years.

It has however greatly increased in price.

Looking back at the long term, it "should" be trading around $30 taking inflation into account and that should be sufficient to bring on a rush of new production.

There's no major crisis I agree, but the notion that oil is becoming gradually scarcer would seem to be true. Price that was profitable in the past is considered unprofitable today - the oil that remains is getting harder and more costly to extract.

 

[JohnDe]

It has however greatly increased in price.

Looking back at the long term, it "should" be trading around $30 taking inflation into account and that should be sufficient to bring on a rush of new production.

There's no major crisis I agree, but the notion that oil is becoming gradually scarcer would seem to be true. Price that was profitable in the past is considered unprofitable today - the oil that remains is getting harder and more costly to extract.

That can be said about a lot of things, such as house prices.

30 years ago, I purchased a property for $180,000, that property is now valued at over a million and houses all around it have sold for that price. Yet we have plenty of land in Australia.

I've been hearing about the coming shortage of oil since I was a kid in the 1970's, and the food shortages. Watched all the great sci-fi blockbusters as well

There will be no oil shortage in our lifetime, and prices will continue to fluctuate in the same way as all prices do, supply & demand. And just like diamonds, make it sound like there is a supply issue and watch the punters outbid each other. Another reason for Australia to ween itself off of imported oil as much as possible. EVs has the oil industry worried, but they will always have a market for the industrial base.

 

[qldfrog]

that sounds like a fair summary to me ,

one point over-looked is the direction of finance away from fossil fuel exploration and development ( which will hurt non-BRICS nations )

Indeed, an engineered shortage orchestrated by the west.
Luckily, China, India, basically the rest of the world will carry on and we might benefit from their left over crumbs...
For chemicals, antibiotics, bitumen, fertilisers..and some petrol for the elite generators