A global recession is on the horizon - please read OP for mod warning

Well, I remember distinctly last year when the stock market in the US was going bananas and people were asking what was going on?

The usual response was the market is pricing in inflation because of a) ultra low-interest rates b) QE and c) Bidens stimulus

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Now a year later we have people saying that inflation is nothing to do with monetary policy or any of the above, it's to do with China and/or the war in Ukraine. Sure, these have not helped but why was the market talking about inflation in 2021 when a) there was no war in Ukraine and b) Supply chain issues in Zero-Covid China was not as pronounced as now, now being 2022...

And low and behold we have inflation rates we have not seen in near half a century?

Central banks are now stuck, especially the ECB.

What to do? Increase rates to tackle inflation and risk bankrupting Italy and Greece? Do nothing and let 5,6,7,8% inflation become the norm for the next 10 years with all the political and societal risks that comes with that? Increase rates but bailout the likes of Italy on the side, with some debt forgiveness? I guess the Dutch and Germans will love that!

Its all of their own doing. Again, if one cannot have even 1% rates in the ECB in case some nation-states go bankrupt then something along the lines has broken.

yes, you are right, this is our own doing, but not the way many seem to think it is, and major component of globalization has been to accelerated market liberalisation, move manufacturing to cheaper locations, increasing the complexities of our global supply chains, and when the wee virus turned up, the whole thing went to sh1t, then to add insult, lu-la in russia...... and ta-da, inflation....

again, the majority of money created in both the private domain, i.e. credit, and money created in the so called public domain, i.e. qe via central banks, has been primarily used to inflate asset markets, i.e. it effectively has just remained in the financial sector, doing its thing, i.e. it actually hasnt truly made its way into the main economy, where we all exist. the amount of money that has been created, that has made its way into the economy, i.e. deficit spending, pails insufficiencies to all the other money mentioned above....

yes, central banks are indeed stuck, but again, not for the reasons some believe, we ve pushed the game mentioned above too far, we ve flooded our planet with too much money but for the wrong purposes, we re clearly in serious trouble regarding our most critical of needs, property, health care, major energy infrastructure, environmental needs, etc etc etc, we have clearly fcuked ourselves over, and we ve decided, lets double, triple down! wtf!

interesting you mentioned countries such as greece and italy, by any chance has the overall structure of the eu, especially the euro, and the disturbing way we approached the aftermath of the 08 crash, actually truly lead to these canaries!

funnily enough, they only way out of this mess is direct action, i.e. directly injecting publicly created money, i.e. running deficits, into the economy, and hoping for the best, but whats the chances of that happening! also baring in mind, central banks can never run out of money!

Pardon my limited economic knowledge, but I thought inflation was caused by too much money being in the system?

Is the answer to inflation not higher interest rates which causes people to stop spending and reduce debt?

Surely higher interest rates for a period of causes less spending, which causes the cost of things to contract which then means people eventually end up with more money due to lower prices.

No?

Ok I get that, but is energy prices all there is to it this time?

I know the economy is run in diesel which has shot through the roof.

What is the level of personal debt in the country like?

Anecdotal I know but the amount of people I know taking out loans for discretionary items- holidays new cars etc is quite high.

This leads to inflation too I think.

no, global supply chains are highly complex in nature, covid has done a serious number on them, baring in mind china is only now coming out of wide scale lockdowns, and we all know, most goods are still produced by them, so, expect supply chains to remain all over the shop for a very long, this could be seen over the last couple of months when viewing marine traffic at major Chinese ports, i.e. major traffic jams!

the economy is not only run on diesel, but by all forms of energy, all virtually all energy markets are in serious disarray, so.....

unsure exactly, but i think its 60/70 billion, may stand corrected on that!

yup, increasing the private money supply, the credit supply, i.e. taking out private loans, does indeed add to inflation, this is most noticeable in property markets!

nope....

...exactly the points ive been making, i.e. most money thats been created over the last few decades has in fact remained in asset markets such as the stock markets, i.e. it actually hasnt made its way into the real economy, i.e. it hasnt actually caused our current inflation issues.....

So, if asset prices are crashing now, why do we still have inflation???

I think you are terribly confused about this. Certainly what the US did has contributed to inflation on their end.

This was from last year. We started talking about inflation last year before there was any meaningful inflation. Now its manifested itself in real inflation.

...cause we re still experiencing wide scale supply and energy market shocks.....

yes, cause the supply shocks begun when global supply chains were effectively shut down during covid....

again, the value of asset markets such as the stock markets, is a heavily skewed representation of wealth, since most assets are owned by wealthy entities, the average person owns very little of these assets, effectively most people are not represented by the value of these markets, or virtually, its effectively an exponential representation of the ownership of wealth, i.e. the value of these markets effectively means jack sh1t in the life of the average person, hence why efforts of re-inflating such markets has meant jack sh1t to the average person, hence when politicians turned up and used phrases such as 'keep the recovery going', the average person went, wtf!....

China will continue to shut down on and off for another number of years due to their stance on Covid. It will only get worse from a supply chain point of view.

Plus workers are striking all over the world due to salary demands caused by inflation. Which will cause supply chain issues which will cause inflation. Which will cause workers to strike. Rinse repeat.

Its a right mess.

Those shocks were not on the cards in 2021 yet the market was trying to price in inflation... and here we are....

In other news, 80% of all USD printed was done in the last 2 years...

The Central Bankers got it wrong, very wrong. Remember they used the word 'transitionary' last year?

Just go back 6-12 months and see people screaming about inflation and calling Central Bankers to be more proactive. Now they are running for cover, while blaming Ukraine and China for it. Reminds me of Brexiters blaming the EU, Covid and Putin for their own issues.

The economy was still in slumber mode though. People seem to forget that we only got vaccinated from Covid last year, yet the Fed and Co. were still injecting Trillions into the economy when it didn't need it, well into the end of the year and into this year.

Inflation does not spike in a few days, its takes months for the data to come through.

yes we know, i.e. watch this fail spectacularly!

...again, yes, but in the form of qe!

The scale of QE is such that I feel it must be a contributor to the rise in CPI inflation.