Remember when the mantra from Central bankers was inflation was temporary? This was still being recited late last year, despite the rapidly expanding money supply created by the reaction to COVID (which had already been expanded by the reaction to the GFC in 2007 and beyond.
Ultra-low interest rates were coupled with excessive Government fiscal support from direct payments to businesses and households, and indirect support to businesses. This combined stoked home prices, and credit growth, in an attempt to maximise employment and sheeted inflation mainly to supply chain disruptions which would sort themselves out. RBA Governor Lowe late last year said no rate rise until 2024, and only recently changed his tune.
But fast forward just 6 months, and the tone has been changed completely, with a bevy of the world’s top central bankers delivering a stern and unified message on the need to curb inflation, declaring at Jackson Hole that it is broad based, here to stay and will require their forceful action. Like lemmings, they are now all running to the “must kill off rampant inflation at all costs” exit instead.
Begs the question, were they wrong then, or are they wrong now? And whilst they plan to lift rates significantly higher, will it actually tame inflation or not? And what collateral damage will these rate increases cause? I for one have little confidence in the whole Central Planners and Bankers edifice. They are of course unaccountable, and unelected.
