US inflation slows to 8.5% from a year ago in July from 9.1% in June, with no inflation during the month of July; Data better than expected; Investors celebrate on hopes for soft landings
Bernard. I was seriously informed and grew my knowledge of NZ and world economies by your fantastic piece on inflation, the stashing of cash, and startling caveats. Keep going Bernard. You are seriously needed in NZ and are making a valuable contribution to critical social, economic and climate issues.
How much confidence can be placed in statistics provided by China? I recall the CCP back in the 90's predicted GDP growth would be in the vicinity of 10% and lo and behold it came in near that figure and was also a higher rate than the previous year.
So is their inflation reporting more of the same. "Oh, yes. We have inflation of 2.7% (which is well below the West's inflation. Why can't they do better?).
Thanks Steve. Your scepticism is justified, but for now the numbers seem about right. It’s harder to fake stuff these days, given China’s relative openness on trade at least. Their trade and current account surpluses can be reversed engineered to an extent from other countries numbers. But you’re right that a lot of stuff is hidden in asset price inflation (and deflation), along with money supply growth that dribbles into all sorts of holes, not to mention ‘slippage’ through capital controls and into money laundering in a whole bunch of places.
Of your caveats surely the Warmageddon is the least likely? I find it hard to believe the CCP would be that stupid and self destructive. The other two I’d say all bets are off
I do hope China’s sabre rattling stays at the rattling stage. But dumb things happen when people are flying planes with over-the-horizon missiles at each other at 1,500 KPH. Touch wood.
There is a lot going on here, but it appears the core of your argument for being in 'team transitory' is that: so long as there are no major geopolitical events, or disruptions to the global economy, the course of history will always revert back to the new normal of the last 30 years.
I think it would be beneficial if, at some point, if you could really dive into this idea. The assumptions you put forward are a good starting point. At the moment, they lack detail and finesse to convincingly demonstrate why this is true. There is also a significant gap in your counter-factual to these.
It may also be worthwhile if you could elaborate on the limitations of inflation as a tool. I think you did this a year or so ago(?).. The way it is calculated varies between central banks, but also, it mostly accounts for the outputs of a supply chain.
Thanks Policy Wonk. Love your name. Am a little jealous. I welcome the challenges. Hopefully I’ve been clear in saying it’s a really, really cataclysmic geopolitical events that are my caveats. Pandemics on the Covid scale would count. Truly global and massively destructive wars (WW1/2) would completely destroy globalisation as it operates now and would wreck the low-tax, low investment status quo in the democratic developed economies. The underlying deflationary forces of rising inequality and globalisation would end. Sadly, as Piketty and others have pointed, the only times we’ve massively reversed inequality is during periods of massive wealth destruction and social upheaval (and pandemics…).
On the supply-side driven elements of inflation and the role of central banks, their money printing didn’t create inflation, until it did. My thinking on that is the cash was piled up in a heap and got drier and drier. All the attempts to set it on fire were fizzers, until the supply shocks of covid and the Ukraine war finally got the inferno going. The money printing (at least for now) seems to have stopped. For now. I think if the asset values of the richest are ever truly endangered in 25% plus falls, the central banks will step in again. As they have repeatedly since the original sins of 2008/09. Between 2008/09 and 2021 they got away with it before the deflationary forces on the other side were just too strong. They may find it harder to find excuses next time around, given the inflation scare they’re in the middle of now.
Thanks, Bernard. Excellent commentary, as usual. I was on Team Transitory with you (and just wish many of today’s commentators had lived through the 1970s and could respond with equanimity to events rather than shrieking about the sky falling). Of course, things could change; and will. How about inviting someone along to the Hoon tomorrow who is capable of a spot of forecasting? What would be the effect on the global economy (and ours) of a problem in the Taiwan Strait, given its geographical eminence. How about a spat in the Spratlys?
It’s hoarded in banks and they invest it in themselves and a lot of unethical things. Like Corporations do. When we pay them to destroy people and planet and allow this type of unaccountable price gouging particularly effecting women, children and the poorest who can’t be in more than one place at once then at some point people have to say enough. It is not a good quality of character to rob from the poorest for self interest. I’m not surprised no one wants to stand for election being mainly decent people and collude and be complicit in all the sexism, racism and outright violence, lies and abuse we are all subjected to. What we’ve paid for is not ours our shared values are flogged off to the highest bidder, our contributions mean nothing and go unpaid and unsupported. It is simply take take take and could now escalate to kill, kill, kill. Because there is money saved and the very worst make money from it. All of which comes from our Central Bank. I am absolutely outraged that this Labour Government hasn’t acted to protect and enforce the rights of women and children, our future and the most vulnerable and enforce our human and legal rights here. I’d expect it from the Nats but not supposedly progressive Governments. As for immigration…culturally we have quite enough ignorant violent exploitative misogynists of our own here already to neutralise and mitigate for just look at our abuse stats. So if the most vulnerable are not supported and safe as per various acts and laws and do not have their rights upheld why should we import more ignorant bigots? Because our migrants are largely relatively unskilled or come from countries traumatised and still living in cultures still resembling the Middle Ages or just moving here to exploit (and trash) our National shared resources. It’s a bit of a shit show everywhere really but at least in NZ we have a better chance than most to “fix” the broken systems which are destructive and oppressive and not based on science or evidence but literally “made up” by really NASTY privileged and entitled rich people and their lackeys and enablers we don’t have to listen to or obey at all. Nice analysis today Bernard although the narrative is very male it would be nice to have some reporting on what happened to the women and children over time as really when you say “people” in these narratives you are really referring to men so it’s the political version of the “male gaze”. Some digging into whether women’s rights economics, freedoms and QOL issues have “progressed” much with all this historical narrative may look quite a different experience than the male one. Not progress at all just bloke stuff as told by blokes. 😀 No offence it is the dominant narrative. I wish the media would expand their “news” from the over allocation of time we have to tolerate sport too which is just a time wasting distraction from what’s really going on. Ie bread and circus’ to keep the plebs busy as has always been the way. Cynical on Governments part. Sport is not really their business when kids are living in cars and child poverty and homelessness plus people dying at home of Covid or waiting for treatment (which has relatively easy fixes)and our climate is disintegrating ,really is it? Just bizarre that they can’t or at least seem unable to do their job with the basics.
i really value having Bernard's take as it increases my ability to comprehend why things are as they are, but I rediscover the ground I inhabit by reading/listening to feminist economists. Just cant see how to add energy to those perspectives. I do get what you're saying Kath.
Yes same Bernard you give an awesome traditional analysis of establishment trends etc. But that area doesn’t include much of the women’s experience or ideas of same. Not his fault it was “created” exclusively by and for men.
It’s also quite simple on top of Marilyn Warings wonderful work. The New Zealand Givernment doesn’t treat us as equal or with rights in terms of our and children’s rights in law. Obvious from Super (less) to carers and Mother’s raising children having very low income and invasions of privacy etc etc plus Fathers entirely let off the hook in terms of their legal obligations. Just really sad that this erasure means a business for both Government and others is perpetuated in the trade of women and children continues as a consequence. Which is entirely open to much abuse as we see everywhere against the most vulnerable, most needing of supervision and care and the resources to do it well for our future. Still very backward and sexist which would be a simple fix to many problems and align better with existing laws currently completely ignored about our rights. Looking forward to that interview though!
It would be good to read Acts such as the Property Relationship Act 1976, the Family Proceedings Act 195?, and the Child Support Act 1992 for example to see why successive Governments have reduced access to Justice. One day their will be an analysis of how many resources went to privilege men over women and children from the get go (like ACC) and how many rights women and children (yes even babies) lost to achieve anything which would never happen to men as a class. Remembering all the examples like 7000 children still in “state care” and the horrific history of that and the current abuses in their that remain largely unreported. Especially from their Mothers perspective. They’re just being sold by Government to keep women oppressed and poor (enslaved) with fewer rights and second class citizenship really.
I agree we have a better chance than other countries we just need the median voter to wake up and realise climate change could be the end of days for our civilisation, and poverty is unacceptable.
“cultures still resembling the Middle Ages” aren’t the evangelicals trying to take the USA back there?
Bernard, great commentary. I was encouraged that you referred to the strong economic growth in the West from the 1940's - 1980's due to massive government investment in infrastructure & productivity. Your graph comparing China with NZ's infrastructure investment says it all & explains why NZ has a $1T infrastructure deficit. Put simply, if the State doesn't invest in infrastructure, then nothing happens. The low tax, low State investment that has characterised NZ since the 1980's (your 30:30 governmental mantra) will only accelerate if there's a National/Act government next year. National plans to cut government revenue by $2M each year to finance tax cuts & Act's proposed cuts are $7M - God help us.
Thanks Dean. I’m not sure there’s too much difference between the two, other than in the public-ness of the mean-ness and grasping. This Labour Government has been the most effective Government in our history at widening inequality and increasing poverty. Both parties adhere very strongly to 30/30.
Labour has been a big let down. I feel conned - or I would, except that they've never apologised for Roger Douglas et al, and are still somehow steeped in that flavour so I don't vote for them except if the Nats might win.
You're right Bernard, in the sense that Labour has been a huge disappointment, but it is concerning that in the face of so much social & economic need, the 2 right wing parties flagrantly promote tax cuts - it defies logic.
As with many things, I think there's an element of transitory inflation, but also some structural shifts which may keep it elevated above the recent norms.
Cheaper energy in the long-term, but not without trillion$ of infra investment in the short/medium.
Increasing losses from and investment against physical climate risks.
Inheritance from dying Boomers will likely be invested in housing/assets, rather than saved by their struggling offspring (any studies on this?).
Reading your thoughts on where globalization could lead reminded me of "The Inevitable: Understanding the 12 Technological Forces that will Shape your Future" by Kevin Kelly (Founding executive editor of Wired magazine). Everything solid is becoming a verb. Products become services. So yes, I agree with you - there is still a long way to go with globalization and every new invention will end up going through the same process.
Bernard. I was seriously informed and grew my knowledge of NZ and world economies by your fantastic piece on inflation, the stashing of cash, and startling caveats. Keep going Bernard. You are seriously needed in NZ and are making a valuable contribution to critical social, economic and climate issues.
Thanks Terrence. Much appreciated.
How much confidence can be placed in statistics provided by China? I recall the CCP back in the 90's predicted GDP growth would be in the vicinity of 10% and lo and behold it came in near that figure and was also a higher rate than the previous year.
So is their inflation reporting more of the same. "Oh, yes. We have inflation of 2.7% (which is well below the West's inflation. Why can't they do better?).
Thanks Steve. Your scepticism is justified, but for now the numbers seem about right. It’s harder to fake stuff these days, given China’s relative openness on trade at least. Their trade and current account surpluses can be reversed engineered to an extent from other countries numbers. But you’re right that a lot of stuff is hidden in asset price inflation (and deflation), along with money supply growth that dribbles into all sorts of holes, not to mention ‘slippage’ through capital controls and into money laundering in a whole bunch of places.
Hi Bernard,
Of your caveats surely the Warmageddon is the least likely? I find it hard to believe the CCP would be that stupid and self destructive. The other two I’d say all bets are off
I do hope China’s sabre rattling stays at the rattling stage. But dumb things happen when people are flying planes with over-the-horizon missiles at each other at 1,500 KPH. Touch wood.
🤞 It seems like we living through a endless run of shitstorms....
There is a lot going on here, but it appears the core of your argument for being in 'team transitory' is that: so long as there are no major geopolitical events, or disruptions to the global economy, the course of history will always revert back to the new normal of the last 30 years.
I think it would be beneficial if, at some point, if you could really dive into this idea. The assumptions you put forward are a good starting point. At the moment, they lack detail and finesse to convincingly demonstrate why this is true. There is also a significant gap in your counter-factual to these.
It may also be worthwhile if you could elaborate on the limitations of inflation as a tool. I think you did this a year or so ago(?).. The way it is calculated varies between central banks, but also, it mostly accounts for the outputs of a supply chain.
Thanks Policy Wonk. Love your name. Am a little jealous. I welcome the challenges. Hopefully I’ve been clear in saying it’s a really, really cataclysmic geopolitical events that are my caveats. Pandemics on the Covid scale would count. Truly global and massively destructive wars (WW1/2) would completely destroy globalisation as it operates now and would wreck the low-tax, low investment status quo in the democratic developed economies. The underlying deflationary forces of rising inequality and globalisation would end. Sadly, as Piketty and others have pointed, the only times we’ve massively reversed inequality is during periods of massive wealth destruction and social upheaval (and pandemics…).
On the supply-side driven elements of inflation and the role of central banks, their money printing didn’t create inflation, until it did. My thinking on that is the cash was piled up in a heap and got drier and drier. All the attempts to set it on fire were fizzers, until the supply shocks of covid and the Ukraine war finally got the inferno going. The money printing (at least for now) seems to have stopped. For now. I think if the asset values of the richest are ever truly endangered in 25% plus falls, the central banks will step in again. As they have repeatedly since the original sins of 2008/09. Between 2008/09 and 2021 they got away with it before the deflationary forces on the other side were just too strong. They may find it harder to find excuses next time around, given the inflation scare they’re in the middle of now.
Thanks, Bernard. Excellent commentary, as usual. I was on Team Transitory with you (and just wish many of today’s commentators had lived through the 1970s and could respond with equanimity to events rather than shrieking about the sky falling). Of course, things could change; and will. How about inviting someone along to the Hoon tomorrow who is capable of a spot of forecasting? What would be the effect on the global economy (and ours) of a problem in the Taiwan Strait, given its geographical eminence. How about a spat in the Spratlys?
Thanks Anne. Working on the guests for tomorrow.
It’s hoarded in banks and they invest it in themselves and a lot of unethical things. Like Corporations do. When we pay them to destroy people and planet and allow this type of unaccountable price gouging particularly effecting women, children and the poorest who can’t be in more than one place at once then at some point people have to say enough. It is not a good quality of character to rob from the poorest for self interest. I’m not surprised no one wants to stand for election being mainly decent people and collude and be complicit in all the sexism, racism and outright violence, lies and abuse we are all subjected to. What we’ve paid for is not ours our shared values are flogged off to the highest bidder, our contributions mean nothing and go unpaid and unsupported. It is simply take take take and could now escalate to kill, kill, kill. Because there is money saved and the very worst make money from it. All of which comes from our Central Bank. I am absolutely outraged that this Labour Government hasn’t acted to protect and enforce the rights of women and children, our future and the most vulnerable and enforce our human and legal rights here. I’d expect it from the Nats but not supposedly progressive Governments. As for immigration…culturally we have quite enough ignorant violent exploitative misogynists of our own here already to neutralise and mitigate for just look at our abuse stats. So if the most vulnerable are not supported and safe as per various acts and laws and do not have their rights upheld why should we import more ignorant bigots? Because our migrants are largely relatively unskilled or come from countries traumatised and still living in cultures still resembling the Middle Ages or just moving here to exploit (and trash) our National shared resources. It’s a bit of a shit show everywhere really but at least in NZ we have a better chance than most to “fix” the broken systems which are destructive and oppressive and not based on science or evidence but literally “made up” by really NASTY privileged and entitled rich people and their lackeys and enablers we don’t have to listen to or obey at all. Nice analysis today Bernard although the narrative is very male it would be nice to have some reporting on what happened to the women and children over time as really when you say “people” in these narratives you are really referring to men so it’s the political version of the “male gaze”. Some digging into whether women’s rights economics, freedoms and QOL issues have “progressed” much with all this historical narrative may look quite a different experience than the male one. Not progress at all just bloke stuff as told by blokes. 😀 No offence it is the dominant narrative. I wish the media would expand their “news” from the over allocation of time we have to tolerate sport too which is just a time wasting distraction from what’s really going on. Ie bread and circus’ to keep the plebs busy as has always been the way. Cynical on Governments part. Sport is not really their business when kids are living in cars and child poverty and homelessness plus people dying at home of Covid or waiting for treatment (which has relatively easy fixes)and our climate is disintegrating ,really is it? Just bizarre that they can’t or at least seem unable to do their job with the basics.
i really value having Bernard's take as it increases my ability to comprehend why things are as they are, but I rediscover the ground I inhabit by reading/listening to feminist economists. Just cant see how to add energy to those perspectives. I do get what you're saying Kath.
Yes same Bernard you give an awesome traditional analysis of establishment trends etc. But that area doesn’t include much of the women’s experience or ideas of same. Not his fault it was “created” exclusively by and for men.
Appreciate that Kath and WendtK. Still learning. My next task is to interview Marilyn Waring.
It’s also quite simple on top of Marilyn Warings wonderful work. The New Zealand Givernment doesn’t treat us as equal or with rights in terms of our and children’s rights in law. Obvious from Super (less) to carers and Mother’s raising children having very low income and invasions of privacy etc etc plus Fathers entirely let off the hook in terms of their legal obligations. Just really sad that this erasure means a business for both Government and others is perpetuated in the trade of women and children continues as a consequence. Which is entirely open to much abuse as we see everywhere against the most vulnerable, most needing of supervision and care and the resources to do it well for our future. Still very backward and sexist which would be a simple fix to many problems and align better with existing laws currently completely ignored about our rights. Looking forward to that interview though!
It would be good to read Acts such as the Property Relationship Act 1976, the Family Proceedings Act 195?, and the Child Support Act 1992 for example to see why successive Governments have reduced access to Justice. One day their will be an analysis of how many resources went to privilege men over women and children from the get go (like ACC) and how many rights women and children (yes even babies) lost to achieve anything which would never happen to men as a class. Remembering all the examples like 7000 children still in “state care” and the horrific history of that and the current abuses in their that remain largely unreported. Especially from their Mothers perspective. They’re just being sold by Government to keep women oppressed and poor (enslaved) with fewer rights and second class citizenship really.
I agree we have a better chance than other countries we just need the median voter to wake up and realise climate change could be the end of days for our civilisation, and poverty is unacceptable.
“cultures still resembling the Middle Ages” aren’t the evangelicals trying to take the USA back there?
Bernard, great commentary. I was encouraged that you referred to the strong economic growth in the West from the 1940's - 1980's due to massive government investment in infrastructure & productivity. Your graph comparing China with NZ's infrastructure investment says it all & explains why NZ has a $1T infrastructure deficit. Put simply, if the State doesn't invest in infrastructure, then nothing happens. The low tax, low State investment that has characterised NZ since the 1980's (your 30:30 governmental mantra) will only accelerate if there's a National/Act government next year. National plans to cut government revenue by $2M each year to finance tax cuts & Act's proposed cuts are $7M - God help us.
$2B?
Thanks Dean. I’m not sure there’s too much difference between the two, other than in the public-ness of the mean-ness and grasping. This Labour Government has been the most effective Government in our history at widening inequality and increasing poverty. Both parties adhere very strongly to 30/30.
Labour has been a big let down. I feel conned - or I would, except that they've never apologised for Roger Douglas et al, and are still somehow steeped in that flavour so I don't vote for them except if the Nats might win.
You're right Bernard, in the sense that Labour has been a huge disappointment, but it is concerning that in the face of so much social & economic need, the 2 right wing parties flagrantly promote tax cuts - it defies logic.
As with many things, I think there's an element of transitory inflation, but also some structural shifts which may keep it elevated above the recent norms.
Cheaper energy in the long-term, but not without trillion$ of infra investment in the short/medium.
Increasing losses from and investment against physical climate risks.
Inheritance from dying Boomers will likely be invested in housing/assets, rather than saved by their struggling offspring (any studies on this?).
Reading your thoughts on where globalization could lead reminded me of "The Inevitable: Understanding the 12 Technological Forces that will Shape your Future" by Kevin Kelly (Founding executive editor of Wired magazine). Everything solid is becoming a verb. Products become services. So yes, I agree with you - there is still a long way to go with globalization and every new invention will end up going through the same process.