The Fourth Horseman - Inflation?

[mongers]

Putin has unleased a third rider, widespread war, that builds on the Coronavirus and the big background threat from Climate Change, so might now a fourth rider be making an appearence, that of generalised Inflation?

Maybe even stagflation in some countires?

So what are you're thought, are we entering a period of sustained inflation?

What are your personal experiences of it and do you have any plans to combat it's affects on your and your family?

I should add I think generalised global inflation is a good proxy for the Famine, one of the tradition riders, as it will lead to food stress in many parts of the world. 

[crazy canuck]

I am not sure about the inflation question, but Europe is now even more highly motivated to shift away from fossil fuels and so perversely move more quickly toward solving the climate warming problem.

[Barrister]

I should add I think generalised global inflation is a good proxy for the Famine, one of the tradition riders, as it will lead to food stress in many parts of the world. 

I wonder if we aren't going to see localized famine in Ukraine and Russia as a result of the war and sanctions...

[Sheilbh]

I wonder if we aren't going to see localized famine in Ukraine and Russia as a result of the war and sanctions...

Wheat prices are up 50% - I think Indonesia and Egypt are the two big exposed countries.

It might not be famine but in lots of the developed world one of the big things governments do is subsidise food especially for staples like bread. So they will either have to decrease subsidies/increase prices which has triggered revolutions before or probably spend a lot of money keeping subsidies/prices stable.

So what are you're thought, are we entering a period of sustained inflation?

I was team transitory - I thought a lot of inflation was to do with one off covid shocks working their way through the system. But I think you add into that a set of huge supply shocks on fuel/energy and food and it is more likely to spread/become generalised maybe?

[Jacob]

I should add I think generalised global inflation is a good proxy for the Famine, one of the tradition riders, as it will lead to food stress in many parts of the world. 

I wonder if we aren't going to see localized famine in Ukraine and Russia as a result of the war and sanctions...

If we are, we'll probably see it elsewhere as well given that they're both big food exporters.

[OttoVonBismarck]

I think a lot of the inflation at least in the United States and probably many other economies were supply chain shock based which you could conclude was transitory, but I think it was only transitory if those supply chain issues had been fixed relatively quickly. Once prices go up for long enough much of business and economic activity re-baselines around the new pricing--wages also do as well, so it isn't like you easily unwind that. I think Biden's stimulus also was directly inflationary in the U.S., particularly the $1400 checks he mailed out (which were largely not necessary) and the large number of cash payouts through the child tax credit. Some aspects of the stimulus and the infrastructure bill were not inflationary since they were often funded at least partially and as a rule tax-funded spending generally won't be directly inflationary.

I think we may be entering a long term and sustained energy crisis and that is going to drive prices (energy is a major driver of inflation), I perversely think yet another oil crisis is actually probably a good thing for the world as a whole because it will help countries that are capable of transitioning to lower oil use scenarios find the political justification/will to start doing so; but it's going to lead to bad political shocks and lots of problems for a long time.

If we come out the other side of it I'm long term optimistic because I think covid and this war and a few other things have exposed a lot of weaknesses in our global system. I think ten years from now supply chains and inventory management for example are very likely to be done with very different assumptions than they were the prior 20 years. Also I think there is a growing awareness the age of really cheap shipping (I'm talking oceangoing bulk and container shipping) is over, and that is going to have to be a prominent factor in deciding what makes sense to offshore and what doesn't.

[Josephus]

I never saw climate change as one of the four horsemen, though I guess it can be.
Otherwise, we've had plagues, war and, potentially, as BB says, famine.

So with inflation, and climate change, I guess this is the apocalypse 

[crazy canuck]

I never saw climate change as one of the four horsemen, though I guess it can be.
Otherwise, we've had plagues, war and, potentially, as BB says, famine.

So with inflation, and climate change, I guess this is the apocalypse 

You are old enough to remember when we had real inflation.  I am not sure yet how serious this is.

[Sheilbh]

Not sure about other countries - but KPMG's forecast for the UK:


Yikes

[Josquius]

It's curious if high inflation does become the norm considering so much else seemed to point towards following the course Japan has set in recent decades.

Temporary covid induced problem on top of a otherwise stagnant situation?

[Sheilbh]

It's curious if high inflation does become the norm considering so much else seemed to point towards following the course Japan has set in recent decades.

Temporary covid induced problem on top of a otherwise stagnant situation?

Yeah I think there's a covid demand shock, there's also clearly a lot of supply chain issues which we've seen China and the US. There are a few other "shocks" too - like this war with all its implications and we're in the very early days of seeing them, but also the coal supply issues in China.

But I don't think the situation was necessarily stagnating underneath that. For example, I think the Chinese/Asian shift to gas is a huge deal and isn't temporary. I think we've been used to trends in the US or - at a push - European economy as the big drivers of things like global inflation. But I think we now have to include China in that as well in a way that we maybe weren't super-aware of pre-covid.

[Tamas]

One thing I am pretty sure of is that now officially a decade of reckless money printing and asset-bubbling will be left off the hook, as any and all economic troubles will be blamed on the war, definitely NOT on messed up central bank policies.

[crazy canuck]

Well yeah. If you were convinced that the policies of the last decade were reckless then you would necessarily not consider other options. However not everybody is like that.

[Sheilbh]

Meanwhile as well as locking down Shenzhen for six days (this caused the biggest fall in Chinese stock markets since 2008):



There's an awful lot of news out there that if it keeps going (and is cumulative) looks very worring indeed.

[Jacob]

Yeah, as I mentioned in the China thread - the worst crop in a century is combined with skyrocketing prices for imported food (and energy) as well. Hardly ideal for China.