Shock at inflation rise shows forecasters are clueless
The big economic news this week was that forecasters had fallen off their stools at the shocking rise in the inflation rate. The fact it was shocking to them shows they don’t really have a handle on the economy.
“New Zealand inflation surged in the second quarter, breaching the central bank’s target range for the first time in 10 years and fueling bets it will start raising interest rates as soon as next month.”
This shouldn’t be a shock to anyone who can think clearly and do maths. The problem with many of NZ’s economists, especially the ones who work for Grant Robertson, is that they are ideologically hidebound. Their faith in the Keynesian system and socialist economic theory confounds their grasp on reality.
That reality is you can’t shut down huge sectors of the economy, thereby making them non-productive, and then feed money into that sector of the economy without creating inflation. Especially when that money is borrowed or worse just pieces of paper processed through a printing press.
If you do this, you create an entirely false economy and one day that false economy is going to unavoidably collide with reality. NZ’s steeply rising inflation is an indication that collision is occurring.
Transport for example is central to western economies. Trucks carry materials used in production, then they distribute the items produced from those materials. Without trucks the whole economy is stopped in its tracks. While this reality is starkly obvious in the transport sector it actually applies just the same in all sectors. Perhaps not to the same important degree, but nevertheless it happens.
Thousands of businesses have been halted during the shutdown. Truckers can’t truck, surveyors can’t survey, factories can’t factor, tourists can’t travel. The economy is actually non-existent, but due to fake govt relief money the cash keeps flowing. So cash flows but nothing is produced.
The outcome of this scenario is obvious to anyone with a brain. There is going to be lots of cash about but very little product. Increased demand coupled with shortage of supply. This is recognised even by left wing economists as the perfect inflationary storm.
That’s why there should not have been surprise at this quarter’s rise. That forecasters admit to this surprise is even more evidence of how detached from reality the Ardern govt and its advisors are.
Of course they are led by a pudgy non-event who has never really been anything in life other than a far left student activist. So why would we rationally expect any outcome other than disaster?
This blog has for some time been predicting a savage economic change, and the disbelief has been palpable. What? Everything is going swimmingly. Jacinda’s in charge and she’s looking after us! Grant knows his stuff and its all cool. Its a “problem of growth” he says.
Mass hysteria. Mass insanity. Anyone who has read celebrated leftist economist Erich Fromm knows the trick is to try and see things as they really are. We’ve forgotten this maxim, but here in New Zealand especially, we’re soon going to be reminded of it by means of the monstrous inflation driven economic train wreck that is roaring down upon us.