May 13, 2022

Why is it that no one can come to terms with what inflation is or what causes it?

• Answer: orthodox economics cannot decide if they like it or not.

• The new narrative coming from the financial system is that "higher than normal" inflation is here to stay. That is, high inflation is the new normal.
• Why do they think this? Actually, it is the same reason that they thought inflation was transitory about 4-6 months ago: the correlation graphs they try to measure "inflation" with have a self-reinforcing feedback in them. At the beginning of the increase inflation looked like it was going to come back to normal, now because the new normal is higher, it looks like it will stay around.
• It is more complicated than this, of course. But, not much.

• Incidentally, this is also the reason that we will be pushed into the recession (a "hard landing") by the central banks.

“The long era of low inflation, suppressed volatility, and easy financial conditions is ending,” said Mark Carney, the former governor of the Bank of England, and before that, the Bank of Canada. The economics of the coming period will be “more challenging,” he said.

It is also the confusion between price increases and inflation:

This from Bloomberg reporting on, well, itself:

Among the dynamics that will keep price gains high:

• The end of increasingly globalized supply chains. Globalization was fraying even before pandemic, and now war has made things worse
• Growth in the world’s labor force has slowed
• The looming cost of transitioning to net-zero carbon emissions is likely to push all kinds of prices higher in the years ahead
• There’s also the prospect of a sustained run-up in rents due to America’s dearth of affordable housing

• The USA is the dominant economy in the capitalist world. As such, it gets to set the tone and decide who pays for its excess.

• And, the wealthy did better inside the US. Go figure.

• Wealth grew

• Men made out better

• China kept its inequality about par throughout the pandemic:

• Sound familiar? It should if you live in Ontario because it is caused by the same problem.

In an interview with Bloomberg TV, Sunak said IT problems had proved insurmountable. “The operation of our welfare system is technically complicated,” he said. “It is not necessarily possible to [increase benefits] for everybody. Many of the systems are built so it can only be done once a year, and the decision was taken quite a while ago.”

Sunak told Bloomberg: “The best way to address cost of living is to get people into work.”

• Almost like it was designed that way. Oh, wait! It was.

• In other news, capital is mad because Sunak is no longer listening to them and has not increased profit subsidies – unlike governments in other countries like Canada. There is a question about the Conservative's commitment to "growth".
• Oddly, this has business lobby groups yearning for the New Labour Blair days of aggressive pro-business decisions like independence of the Bank of England.

Clawing back billions in profits from some of Britain’s most successful global businesses to boost the government’s support could be the final straw for businesses wondering if the government is ever going to prioritize growth at all.

• Tether is neither stable nor a tether to the real world it seems.
• Wonder why Tether is important? Stable coins allow fake money of crypto to be exchanged for real dollars.
• If stable coins are not stable, this entire thing falls apart.

And, it did for more than a bit yesterday:

• With one Tweet, Musk removes nearly 20% of Twitters "value".

  Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of usershttps://t.co/Y2t0QMuuyn — Elon Musk (@elonmusk) May 13, 2022