Inflation Predictions

debt accumulation is dangerous now, its preventing us from advancing and doing what needs to be done, in order to increase our longevity on the planet, we need some inflation, in order to try deal with these historic levels of debt, but inflation alone probably wont solve this issue, we may need to enact radical polices such as debt jubilee's, in order to truly deal with it

fair argument i guess!

With the end of the pandemic crisis hopefully in sight, I would foresee considerable improvements over coming year in supply chain logistics. All else withstanding, this should surely see the start of some stabilisation on the economy, although the ripples will be felt, se specially in some sectors, for years to come.

Yes, the era of free money is finally coming to an end. It seems that they really did pump too much stimulus...

Yes, in the US retail sales are up massively compared to 2019 and have exploded...port volumes way over 2019 levels. The issue is demand...along with inventories low. Also consumer balance sheets are in great shape.

Its a big game with the ECB they might talk the big talk as regards inflation and pretend that inflation is not the issue it is. They are in deliberate denial for one reason they are unable to raise interest rates to quench out inflation because of the indebtedness of european governments most notably our own. Already interest rates are rising now because the bond markets don't believe the ECB.

If they started now talking of stopping the bond buying well then interest rates would really take off and the governments would not be able to continue with the Covid supports and restrictions. Christine Lagarde is going to soon face her big test because the bond markets do not believe what she is saying. If the ECB does not raise interest rates when both dollar and sterling rates are going up well then the euro will fall on global currency markets which will only exasperate already high inflation rates especially energy.

The BoE have raised interest rates and the Fed have signaled that they will do so next month. This pits them squarely against the ECB and specifically their chief economist Philip Lane. He made comments the other day that implied that raising rates wouldn't have the desired affect due to the fact that the primary causes of inflation, supply chain bottlenecks and soaring energy prices, are actually external to the Eurozone. In fact he said that raising rates would be worse than that - since it would create its own problems without resolving those other ones:

So....who's right and who's wrong? Is Philip Lane playing a game of Chicken with Eurozone inflation rates?

link

Pandemic payments are a big cause of inflation - the money is basically printed and given to people out of work to spend - these people were (through no fault of their own) out of work, and as they were not working they did not produce anything to merit the money they now had. Pandemic supports were an inflationary factor, albeit with a somewhat delayed impact.

That combined with the sharp drop in demand during start of pandemic, and the impact that had on production, supply chains etc have caused material shortages and abnormally high demand despite it all.

In a "normal" economy, a big dropoff in demand like that would cause less money to circulate and some people would lose a lot of money - and when economy picked back up the demand would not be as high, and would slowly rise. Income supports bridged that gap so that after suppliers curtailed production, demand jumped right back up when it shouldnt have.

the USA they have seen wage inflation which will create secondary inflation so as you say it is hard to know if Fed are raising rates as the economy starts to cool leading to a recession.

The ECB are comfortable with a longer period of inflation to eat away debt.

Given the woeful growth in the Eurozone for the last 15 years there is capacity there.

It's a bit of a blessing for the ECB.