Inflation

[3 hound]

From the article;

"It would now seem the MMT experiment, here and overseas, has failed. We are left with an intractable situation in which cost-of-living pressures are likely to increase significantly but now the government and the Reserve Bank essentially are impotent to do much about these pressures without hurting the economy."

Chilling given how much money has been printed.

 

[waterbottle]

From the article;

"It would now seem the MMT experiment, here and overseas, has failed. We are left with an intractable situation in which cost-of-living pressures are likely to increase significantly but now the government and the Reserve Bank essentially are impotent to do much about these pressures without hurting the economy."

Chilling given how much money has been printed.

Reset incoming?

 

[3 hound]

Reset incoming?

Well some are pushing for "the great reset" but I don't think it's the reset people here (including me) want to see happen.

I think reset in modern parlance refers to forced wealth redistribution from haves to have nots.

 

[divs4ever]

From the article;

"It would now seem the MMT experiment, here and overseas, has failed. We are left with an intractable situation in which cost-of-living pressures are likely to increase significantly but now the government and the Reserve Bank essentially are impotent to do much about these pressures without hurting the economy."

Chilling given how much money has been printed.

sadly the folks that love MMT are likely to double , triple and even quadruple down ,

what comes next will be epic ( a miracle if good , a mess if not )

 

[divs4ever]

Well some are pushing for "the great reset" but I don't think it's the reset people here (including me) want to see happen.

I think reset in modern parlance refers to forced wealth redistribution from haves to have nots.

there will have to be a 'great reset ' now but would you let the folks that pondered , studied and war-gamed it for twenty plus years , be in control of anything ( even a pay-toilet )

sadly 'want' is no longer an option , what type of reset still maybe ( back to gold and barter , small local governments and start all over again building a community built on MUTUAL trust )

forced redistribution kills productivity , initiative , and creativity , even the Soviets discovered that , eventually ( but the great reset agenda plans that for you but NOT for them )

 

[Smurf1976]

It would now seem the MMT experiment, here and overseas, has failed.

What irritates me is that the outcome was not only predictable, but actually predicted by many meanwhile the advocates for this approach ridiculed those pointing out the obvious flaws right up to the point it all started to go pear shaped.

That's referring to society overall not to others on this forum.

 

[divs4ever]

yes MMT is doomed to fail because of human ( and politician's ) nature

and was very surprised to find an example of it working in Australia ... until politicians , and corporations got involved .. and self-interest did the rest ( just like currently in many places )

 

[over9k]

Not the worst call I've made

 

[over9k]

Aaaaand 50 basis point rise decided, 75 not happening:



50 is on the table for the next "two meetings".

 

[waterbottle]

Aaaaand 50 basis point rise decided, 75 not happening:

View attachment 141256

50 is on the table for the next "two meetings".

Thank you St Jerome, my prayers have been answered.


Interesting to note the inflationary drivers they're considering are Russia-Ukraine and China lockdown. These will likely be temporary drivers of inflation, so I suspect interest rates won't be increasing too far or remaining elevated for too long

 

[qldfrog]

Thank you St Jerome, my prayers have been answered.


Interesting to note the inflationary drivers they're considering are Russia-Ukraine and China lockdown. These will likely be temporary drivers of inflation, so I suspect interest rates won't be increasing too far or remaining elevated for too long

Elevated? You are joking are you?
as long as negative real interest are around, inflation will carry on .
simple logic..you take a loan to buy something even for a car !!! and sell it a couple years later for more.

 

[over9k]

Thank you St Jerome, my prayers have been answered.


Interesting to note the inflationary drivers they're considering are Russia-Ukraine and China lockdown. These will likely be temporary drivers of inflation, so I suspect interest rates won't be increasing too far or remaining elevated for too long

Nah it's going to be the opposite waterbottle - china's lockdowns actually slaughtered demand. Once they're lifted, energy demand will only increase rapidly again, hence my posts a few days back showing how much of a beautiful dip this was. Chinese good manufacturing will only INCREASE inflation as the energy demand increase will far outweigh the export supply increase as china obviously has a huge internal market that demands its stuff (and therefore production of it) as well.

The russian pipeline network is now a ticking time bomb reference either crumbling from lack of maintenance or partisans blowing it to bits. There's MORE russian oil to be cut off non-deliberately yet, and there won't be anyone to fix the wells freezing over, lines bursting etc as all the western companies have left.

Then we have seasonality to contend with heading later into the year as well as everything gets frozen over/wrecked by the cold. Remember what happened to heating oil, gas prices etc back at the start of the year?

I'm as bullish as it gets on energy moving forward. I threw another 10k into the dip I pointed out before (made my main play for it back at the start of the year as soon as the invasion became apparent) and am honestly only kicking myself I didn't put more in on the 25th.

I'm hoping we'll get a little dip over the next few days or week that I can add a bit more to.

 

[waterbottle]

Nah it's going to be the opposite waterbottle - china's lockdowns actually slaughtered demand. Once they're lifted, energy demand will only increase rapidly again, hence my posts a few days back showing how much of a beautiful dip this was. Chinese good manufacturing will only INCREASE inflation as the energy demand increase will far outweigh the export supply increase as china obviously has a huge internal market that demands its stuff (and therefore production of it) as well.

The russian pipeline network is now a ticking time bomb reference either crumbling from lack of maintenance or partisans blowing it to bits. There's MORE russian oil to be cut off non-deliberately yet, and there won't be anyone to fix the wells freezing over, lines bursting etc as all the western companies have left.

Then we have seasonality to contend with heading later into the year as well as everything gets frozen over/wrecked by the cold. Remember what happened to heating oil, gas prices etc back at the start of the year?

I'm as bullish as it gets on energy moving forward. I threw another 10k into the dip I pointed out before (made my main play for it back at the start of the year as soon as the invasion became apparent) and am honestly only kicking myself I didn't put more in on the 25th.

I'm hoping we'll get a little dip over the next few days or week that I can add a bit more to.

Interesting theory! But what makes you think that China's manufacturers recovering will be net pro-inflationary?
Forecasts for POO were at $150-200/bl when Russia started their invasion - these costs haven't materialised.
Governments recognise the importance of energy security so I doubt the geopolitical factors contributing to limited oil supply in Feb 2022 will be the same come Feb 2023. Keep in mind the US and the West are trying to source alternative oil sources, Saudis are trying pump harder and the green economy transition that is already under way....

 

[waterbottle]

Elevated? You are joking are you?
as long as negative real interest are around, inflation will carry on .
simple logic..you take a loan to buy something even for a car !!! and sell it a couple years later for more.

No, I'm serious.

Inflation is built into the system. It's the whip that keeps the donkey moving forward to the carrot.
Listen to the speech that St Jerome's have today - central banks want long periods of expansion. They want inflation at 2-3%, but will tolerate short periods of higher inflation. The Fed acknowledges that the past year has been unprecented due to unforeseen "inflationary shocks" I. E. Russia and China, and I suspect that they are blaming them for the "failed" transitory inflation theory (probably mistimed).
The Fed acknowledges that the past 2 months of data shows inflation declining but it is isn't sustained enough for them to base any policy decisions off.

 

[JohnDe]

Macquarie Bank’s Viktor Shvets warns us to expect disinflation in two years

Macquarie Bank’s Viktor Shvets expects runaway global inflation to swing back to disinflation very quickly, and for the US Federal Reserve to back off from its aggressive rate-rising strategy in as little as 12 months.

The bank’s New York-based head of global and Asia-Pacific strategy also predicts China will not be in a position to open up fully until the middle of next year.

“The West tends to look in terms of opportunity and profit maximisers, look at everything as marginal returns. Because of the history of Russia they tend to believe they are surrounded by enemies, they tend to be loss minimisers, to be pain minimisers. They tend to look in average rather than marginal terms and the average doesn’t change that quickly. So the country very much feels they are besieged.”

The Ukrainian-born Shvets says true conflict resolution will only come when one side or the other is exhausted. An independent Ukraine is now armed to the teeth.

Investors are not good at pricing geopolitical risk. Shvets says the reason is that corporate finance and investment theory is built on normal distribution. Investors try to stay in the middle but geopolitical and pandemic crises are the fat tails. To date, investors have let geopolitics look after itself and focused on stock industry trends, company valuations and interest rates.

“Ninety-five per cent of times that’s exactly the right answer in the last five decades,” says the veteran banker. “Increasingly that is the wrong answer if we have those fat tails coming all the time, instead of once a year or five years or 10. How do you invest when one of the biggest variables you are looking at you can neither estimate nor predict?”

Shvets proposes a base case for investors as an environment where financialisation continues and technology will progress but also an assumption that geopolitical and social tensions continue to escalate.

One of Shvet’s biggest winners is the part of his portfolio the team call bullets and prisons. “That is anybody who manufactures weaponry drones, security services, surveillance is clearly one of the beneficiaries. You can join the game or try to find stocks and sectors relatively immune to it. But there is no way of saying how much your equity risk premium should increase and how much should be reflected of geopolitical pressure you are facing,” he says.

The Shvets view on inflation and interest rates is equally confronting. Over the next 10-15 years he believes there will be rapid oscillation between very high inflation and very high disinflation. And that this inflation-disinflation pendulum is already swinging fast.

He says in place of the long period of inflation in the 1970s and 80s and the long period of disinflation that followed, going forward, the world will have both.

“And who is going to determine which one wins?” he asks. “Two parties: one is the government and the other is your fat tails or black swans. The more government puts its finger on the scales the greater inflationary spike you are going to get. The more governments retreat and decide we needed to pay it back or normalise our fiscal situation, the more inflation will start retreating.”

Shorter term – as short as the next six to 12 months – Shvets expects a more disinflationary trend. “People could be surprised how quickly some of those prices could retreat rather than be inflationary. But if you go further down the track to late 2023 and 2024 you could have another significant inflationary spike,” he says.

Macquarie Bank is forecasting four consecutive 50-basis-point rises from the Federal Reserve, which Shvets points out was unheard of 12 months ago. He sees the Fed raising rates aggressively and then backing up in 12 months.

“My view for some time as we go through 2023 and 2024 is there is a much higher probability of loosening fiscal and monetary policies than tightening.”

Shvets says the key criteria is the neutral rate, reached when both quantitative tightening and interest rates neither expand nor contract economies. And he argues only the US among major economies has some room to move rates up.

“On my numbers they are about 200 basis points below what I would regard as the neutral rate. As the Fed starts tightening both from QT and rates getting closer and closer to neutral rates, the volatility of asset prices will increase substantially. When that happens the financial conditions index will go through the roof, inflation and growth will start to disappear and the Fed will have no choice but to back pedal,” he says.

Shvets warns that central banks are tightening in a climate where is no cyclical recovery and where, with the exception of China fiscal policies are retracting on a global basis. “We are taking out $US3 trillion to $US4 trillion of fiscal deficits over the next 18 months,” he says.

Despite China’s zero Covid policy, the Middle Kingdom announced it would achieve 5.5 per cent growth for 2022.

Shvets does not think China has grown at all in the first quarter and that without an effective home grown vaccine the country will not open up until mid-2023.

But he says China will not opt for another massive stimulus. “China rescued capitalism three times, they are not going to do it again. This idea that they will stimulate massively again, that’s been nonsense for two years now. They are going to try and thread the needle, get just enough somewhere near the numbers they need to achieve,” he says.

TICKY FULLERTON
EDITOR-AT-LARGE, THE AUSTRALIAN BUSINESS REVIEW

https://www.theaustralian.com.au/business/economics/macquarie-banks-viktor-shvets-warns-us-to-expect-disinflation-in-two-years/news-story/604225d967dc53511dac167a2686c4ff

 

[qldfrog]

No, I'm serious.

Inflation is built into the system. It's the whip that keeps the donkey moving forward to the carrot.
Listen to the speech that St Jerome's have today - central banks want long periods of expansion. They want inflation at 2-3%, but will tolerate short periods of higher inflation. The Fed acknowledges that the past year has been unprecented due to unforeseen "inflationary shocks" I. E. Russia and China, and I suspect that they are blaming them for the "failed" transitory inflation theory (probably mistimed).
The Fed acknowledges that the past 2 months of data shows inflation declining but it is isn't sustained enough for them to base any policy decisions off.

Ohh yes they want inflation, but it is now beyond their control.
Our western fiat currencies are heading to a slaughter
Look at USD vs Rubble..
Fiats are doomed so which trick is Jerome going to pull out
Start releasing rates in 6 months as the economy and markets collapse with 15% inflation ?
I see no end but hyperinflation and currency destruction so what's next? a crypto dollar ? Pushing Putin a bit more and have the EU in a nuclear cloud then start a rebuild plan?
And where does this leaves us in OZ with Mr Xi ?
Difficult times and no easy solution anymore..we are paying GFC central banks and gov incompetence with a multiplying factor IMHO

 

[waterbottle]

Ohh yes they want inflation, but it is now beyond their control.
Our western fiat currencies are heading to a slaughter
Look at USD vs Rubble..
Fiats are doomed so which trick is Jerome going to pull out
Start releasing rates in 6 months as the economy and markets collapse with 15% inflation ?
I see no end but hyperinflation and currency destruction so what's next? a crypto dollar ? Pushing Putin a bit more and have the EU in a nuclear cloud then start a rebuild plan?
And where does this leaves us in OZ with Mr Xi ?
Difficult times and no easy solution anymore..we are paying GFC central banks and gov incompetence with a multiplying factor IMHO

Does it really matter what happens to currency? The USD isn't the only fiat crumbling - all fiat's are, and that is by design. So long as the populace recognises and respects the fiat of the day, and continue to transact in it, then it really doesn't matter how many 0s there are before the decimal point.

Money is only a representation of goods and services. AFAIK the USD is the best thing we have for this function. Crypto is unstable and speculative as demonstrated by several iterations of the same product and wild price action.
Commodities are not flexible enough and can't be manipulated to serve the purpose of governments /banks.
Fiat is really the best, worst solution...

 

[divs4ever]

Thank you St Jerome, my prayers have been answered.


Interesting to note the inflationary drivers they're considering are Russia-Ukraine and China lockdown. These will likely be temporary drivers of inflation, so I suspect interest rates won't be increasing too far or remaining elevated for too long

good luck with that

i am thinking the opposite will occur

the first assumption i disagree with is i think the China lock-downs are political , not medical ( all war is based on deception , - Sun Tzu )

and Russia is now deciding how to return fire now it's enemies have declared a side ( before they were just customers )

AND neither is the core reason inflation spiraled out of control , the problems had been brewing for years because national governments avoided the painful medicine ( fiscal restraint and BUDGET surpluses ) ( i have been noticing these issues . apart from the virus response , since 2012 , thinking 2013 things would unravel back then )


AND inflation isn't your long-term problem , it is the nasty crash at the end when the 90% realize their standard of living has been trashed ( while others actually profited because they were 'insiders ' on the pain and misery )

cheers

 

[over9k]

Interesting theory! But what makes you think that China's manufacturers recovering will be net pro-inflationary?
Forecasts for POO were at $150-200/bl when Russia started their invasion - these costs haven't materialised.
Governments recognise the importance of energy security so I doubt the geopolitical factors contributing to limited oil supply in Feb 2022 will be the same come Feb 2023. Keep in mind the US and the West are trying to source alternative oil sources, Saudis are trying pump harder and the green economy transition that is already under way....

Because a lot of it is beyond their control. When the infrastructure for 3 million barrels a day of russian oil is either blown up or crumbles from lack of maintenance, what then?

Remember back when the lockdowns first hit: Everything, but most of all, energy, PLUMMETED. We didn't see any big inflation in anything other than tech really, precisely because everyone were at home and therefore NOT going out and doing stuff/consuming energy.

Bring that demand back online with 25% of the world's oil offline and it's a massacre. You might have increased the supply of whatever you're producing (microchips or steel or whatever) but you've increased demand for the very energy necessary to produce them.

Green energy is no substitute for coal/oil and this is something all the woke countries have learned the very hard way over the last few months. Take a look at ICLN (clean energy etf) vs IXC (big oil etf) year to date to get an idea:



If anything, the last 4 months has actually exposed green energy for the complete fool's errand that it is.

 

[divs4ever]

Does it really matter what happens to currency? The USD isn't the only fiat crumbling - all fiat's are, and that is by design. So long as the populace recognises and respects the fiat of the day, and continue to transact in it, then it really doesn't matter how many 0s there are before the decimal point.

Money is only a representation of goods and services. AFAIK the USD is the best thing we have for this function. Crypto is unstable and speculative as demonstrated by several iterations of the same product and wild price action.
Commodities are not flexible enough and can't be manipulated to serve the purpose of governments /banks.
Fiat is really the best, worst solution...

yes , BUT a currency is also a symbol of trust in the government ( and their economic management )