• Pete Jonson

Henry Thornton, News&Views No. 39

Updated: Nov 16

Inflation redux

1. https://www.henrythornton.com/post/henry-thornton-news-views-no-29

2. Up to date at 14 November 2022

https://www.henrythornton.com/henry-thornton-news-views -no-39



What’s happening?

1. Fiscal overreach, Federal debt well over one trillion with substantial State debt.

2. Interest rate hikes to need further hikes and Australia well behind.

3. Consumer inflation likely to chase US levels.

RBA still grossly mistaken – ‘no rate hike until 2024’.

4. Insufficient cuts in first Labor budget.

5. Real wages will on current plans falling in 2013 and 2014.


What should be done?

1. Don’t panic.

2. Don’t rush to cut interest rates.

- ‘Slow and steady’

3. Don’t rush to cut consumer inflation.

- ‘Slow and steady’

4. Think hard about role of asset inflation.

- Just now asset inflation is falling

- Think hard about what this means

5. Put most effort into raising productivity

6. Control things that are out of control

- Eg NDIS

- Eg keep some international material for home consumption

7. Run a tougher national budget


Efforts by journals – Eg The Economist

1. 5 November, P 70, ‘Faster, higher, longer

2. 22 October, P 65, ‘Why inflation refuses to go away’.

3. October 15, P 65, The drag from lags’.

4. October 8, P 13, ‘What next’?

- ‘Most forecasters reckon inflation in America will fall from the current 8 % to 4 % in 2023 to as energy prices ebb and higher rates bite. Yet the odds of going to 20 % are tiny, there is a serious question about whether governments and centrals can ever bring it back to 2 %.

5. September 24, P 11, ‘Medicine and the brain.’

- ‘Thinking outside the box’.

- ‘Neuroscience is experiencing a renaissance. Not before time’.

6. September 24, 2nd edition, P62, ‘The covid comedown’

- ‘Households across the rich world have never been so gloomy’

7. September 17, P 11,’The perils of wistful thinking.

-To fix America’s inflation problem, the Federal Reserve must go big’



PDJ thoughts

1. Economics needs to analyse ordinary inflation (Friedman and friends) and asset inflation (largely ignored) is not yet common. More two subject work is needed.

2. The second issue is why interest rates rose slowly in and in small bites from the middle of the 1990s to suddenly in 2022.

3. The first era was largely a result of ‘demand inflation’ moving slowly. Then suddenly there was a switch to ‘sales inflation’ pushing large amounts of resources, energy, and other expensive items very hard. More thought needed.

4. I am tempted to try to work these matters hard, but I need a sharp young person to help.


My email address is peterdjonson@gmail.com


KULTURE

Fiona Prior examines why we should care. More here.

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