Australia – inflation still falling while the RBA governor keeps inventing ruses to keep hiking rates
It's Wednesday and there is a lot going on in the data release sense -…
It’s Wednesday and today we discuss the latest inflationary expectations data from the US, which tells me that my assessment that this episode will be a transitory phenomenon, diametric to the experience of the 1979s, was sound, despite the flack I have received over the last several months. The data is now showing consistent, cross-month declines in expected inflation and the latest CPI shows an easing of the general CPI pressure. AS the supply chains return to something like pre-pandemic capacities, then the easing will continue. It is too early to say that this period of elevated CPI rises is over but it sure looks like it and wages have barely moved. Once we get our heads around that I provide some information about an interesting ‘golf’ experiment and finish with some great keyboard playing.
Yesterday (September 13, 2022), the US Bureau of Labor Statistics released the latest – Consumer Price Index Summary – which seems to have prompted rather odd sentiments in the share markets of the world.
The facts are that while the annual rate of inflation is 8.3 per cent as at August, which was 0.2 points lower than the July result.
Inflation is falling.
The petrol index which has been pushing the overall CPI up fell by 10.6 percent in August.
There is still some flow-on from past cost rises into food and other prices, but that will be effect will be temporary.
The headline from the New York Federal Reserve site – Survey of Consumer Expectations – says it all.
The latest data (to August 2022) is shown in the next graph from the Survey of Consumer Expectations.
It shows the 1-year ahead and 3-year ahead inflationary expectations from the survey and it is clear that since May and June 2022, the respective series have been in sharp decline.
The accompanying press release (September 12, 2022) – Inflation and Home Price Expectations Decline Further – notes that:
… inflation expectations continued to decline across all horizons. Expectations about year-ahead price increases for gas also continued to decline, with households now expecting gas prices to be roughly unchanged a year from now …
Expectations about year-ahead price changes fell by 1.4 percentage points for gas (to 0.1%), 0.8 percentage point for food (to 5.8%), and 0.3 percentage point for rent (to 9.6%) …
Median one-year-ahead expected earnings growth remained unchanged at 3.0% in August for the eighth consecutive month.
So wages are not driving anything.
The major supply-side influences that have been instrumental in pushing the inflation rate up are expected to decline relatively sharply in the coming months.
The word to summarise all these trends and sentiments is: transitory.
The MMTed edX MOOC – Modern Monetary Theory: Economics for the 21st Century – starts tomorrow and enrolments are open.
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It is designed for the beginner and equips the participant with a broad array of information designed to develop economic literacy.
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Scanning the headline of this article (September 12, 2022) – Irish Government Pays Artists & Musicians $330 ‘Basic Income’ Allowance (thanks John for the link!), one would be excused for thinking that the Irish government has fallen under the spell of the Basic Income gang.
But when you actually get to the detail the conclusion is that the Government is, in fact, introducing a sort of limited Job Guarantee scheme for musicians along the lines that I have advocated for decades.
The policy (announced in January 2022) is now offering ‘artists’ (musicians, artists, etc) a weekly wage of €325.
This is not a ‘basic income’ policy.
Well for a start the recipients of the wage are required to work in return for the cash.
For a start they have to take “part in a research project to determine the impact of the payment”.
The responsible Minister noted that the recipients were “active in the sector” and provided output that benefits “all people.”
All that needs to happen now is the Irish government to generalise the scheme and ensure that the weekly wage was socially inclusive.
Australia just got a new head of state – some foreign king or another.
We didn’t elect him.
He doesn’t live here.
He can instruct his representative to terminate a democratically elected Australian government (which happened in November 1975).
He once mused that he could be a tampon and “live inside” the trousers of his then illicit girlfriend (Source).
His brother was a mate of Jeffrey Epstein.
And the rest of it – colonial brutality, etc.
Anyway, no comment on the hysteria surrounding the death.
That might seem to be an odd topic for this blog but read on.
As a kid, I grew up in a housing commission (state provided low income housing) estate in Melbourne and I used to spend a lot of time down the East Malvern golf links, which were run by the local council and provided access to the game for working class people.
Golf in Australia is fairly egalitarian in that there are exclusive private clubs but there are also many ‘public’ courses where anyone can play for a relatively low cost.
I was captivated by the game – the physics and geometrical puzzles that it offers and the fact that an effective swinging motion feels quite different to what you think about when you read instruction books.
So as a kid I played a lot.
These public courses are now under attack from developers and higher income citizens who have move into traditional working class suburbs and gentrified them.
The developers want the land to build more energy poor houses that fill the land lots with roof and concrete so they can make a fast profit.
The gentry want the land open so they can walk their dogs and do whatever else they do while parking nearby in their huge SUVs.
This sentiment gathered pace during the lockdowns in 2020 and 2021 when golf was banned in many states and the public took over golf courses as part of their allowed 2 hour exercise outdoors.
We see a range of moves to shut down these courses.
This Carbon Brief article (August 25, 2022) – Factcheck: Is solar power a ‘threat’ to UK farmland? – also pushes the anti-golf movement into the environmental space.
We read that in relation to plans in the UK to build solar farms that:
Even government plans to significantly scale up solar in line with its net-zero target are expected to bring this up to just 0.3% of the UK land area. This is the equivalent to around 0.5% of the land currently used for farming – and roughly half of the space taken up by golf courses.
They provided this graphic to illustrate their point.
I wonder what the comparison would look like if they included lands owned by the royalty in the UK?
The so-called – Crown Estate – sums to around 6.6 billion acres and represents around 1/6 of the total land in the world (Source).
Anyway, I still play the game but with an increased sense of urgency given the environmental considerations – overwatering, chemicals used, etc.
So I was interested in reading this article (which is the point of the item here) – Baa for the course: The golf club that shares a fairway with sheep (August 27, 2022).
The article reports that a public golf course in Melbourne, Victoria is engaging in an experiment in sustainability.
The course has:
… undertaken a novel ecological experiment, which backers say could have profound implications for clubs across Australia, as well as parks and gardens.
The course staff are adopting biological techniques:
… to eliminate artificial chemicals and replace them with microbes that live within the root system of the plant.
… a flock of ruminant animals to maintain the non-play areas of the golf course (about 10 hectares out of the total 23 hectares). The animals came from the Strong Hearts Animal Sanctuary, which rehomes animals surrendered by farms.
So the 10 hectares no longer need tractors/mowers and the animals that would be killed are happily engaged eating away.
They eat the foliage and it passes through their four stomachs, coming out as manure loaded with microbes.
Which are then used as fertiliser along with other compostable materials they generate by saving “kitchen scraps” etc as well as maintaining worm farms and “aerated composting systems.”
At present, the course managers are in the process of transitioning the greens etc to cope with this new organic material.
The spokesperson said that “we need to wean the grass off the drugs”!
So if the experiment works, this will dramatically change the future of golf course management.
This is what I have been listening to while working this morning.
It is from the legendary keyboard player – Jackie Mitto – who is one of my favourite organ and piano players.
He was a Jamaican ska star who died of cancer at the age of 42 before his full potential was realised.
Like a lot of Jamaicans he migrated to one of the richer Commonwealth nations (Canada) and died there.
But what he left behind is magic.
He was a founding member of the famous band – The Skatalites – and a musical director at Clement ‘Coxsone’ Dodd’s – Studio One – record label.
One commentator who was summarising Jackie Mittoo’s contribution said (Source):
Without Jackie Mittoo … there would be no reggae. He was an integral part of the Skatalites and the whole creation of rock steady. The evolution from rock steady to reggae is Jackie Mittoo. Is him really create reggae and even the piano skank on the rock steady bassline dem, is Jackie Mittoo. I don’t know if we can ever pay back Jackie Mittoo for what he did for Jamaican music.
Quite a statement.
This track – Drum Song – was released on the 1968 album (Track 12) – Evening Time by Jackie Mittoo & The Soul Vendors.
The Soul Vendors were Clement Dodd’s studio band who later became the ‘Sound Dimension’. It included all the great players at the time –
1. Roland Alphonso – tenor sax.
2. Johnny ‘Dizzy’ Moore – trumpet.
3. Lloyd Brevett – trumpet.
4. Hector ‘Bunny’ Williams – drums.
5. Errol Walters – bass.
This is Rocksteady at its best. I can cruise all day listening to this.
That is enough for today!
(c) Copyright 2022 William Mitchell. All Rights Reserved.
This Post Has 7 Comments
In the US, I hear that the government is dumping in the market large quantities of oil from the Strategic Petrol Reserves (SPR) to lower the price of oil.
Looks like they have been doing this for quite some time now.
Insiders reckon that the SPR will be depleted in weeks from now, maybe next month already.
We could be in the brink of another oil crisis.
And indeed, it can then begin to look like 1979.
Now, it looks like just another covid related malady.
I been reading really bad stuff about the deceased Queen of England, since I can remenber, but recently, I read a tweet from Branko Marcetic giving the Queen “her due”: the Queen said once that she would stop boycotting the State of Israel “When there is sustainable peace”. That never happened and she did not visited Israel.
It doesn’t erase all the bad stuff, but it shows values – rare in these times of greed.
Many of the things that the Queen has been accused of are related to the British empire, but she witnessed – as Queen – the dismantling of the empire.
It has been replaced by another empire – the US – so I can’t accuse her of imperialism, whithout questioning the empire that followed.
What I see as really bad in her kingship was the inaction (and even support, some say) to the neoliberal agenda: she never called Thatcher, Brown, or Blair and say: you are destroying the UK, mister.
The head of State has a mission too, I believe.
Hi Bill: “The facts are that while the annual rate of inflation is 8.3 per cent as at August, which was 0.2 points.”
Markets don’t care care if a number is good or bad – they care if it’s better or worse than what they though it would be (expected 8.1%). In any case, the focus last night was on the core CPI (i.e., ex food and energy, coz who needs that to live?). This jumped back above its April level. It came in double the level of expectations for August. The market then thinks maybe the Fed hikes by 1% this month (2yr yields jump to pre GFC levels!). Whereas consumers see fuel prices have slumped and are rejoicing; they believe inflation won’t be an issue in 2 years from now. And if the Fed keeps hiking, they’ll be right – sooner than they know. Cheers!
At the rate of drought occurring in the western U.S., golf courses will be vegetation free in years to come. I think the game is noteworthy for skill, but has no business in the Olympics. The Green New Deal that’s been shrunken by political drought is pitifully small for the scope of what’s to come.
Jackie Mittoo. My hero and what pulled me into the Reggae mystique.
Where I don’t share your inflation-optimism is in two areas: Core CPI continues to march upward while drought in the western US threatens the food supply that may again push the headline inflation upwards (https://www.fb.org/market-intel/new-afbf-survey-shows-droughts-increasing-toll-on-farmers-and-ranchers). I agree that the supply chain woes are transitory due to the pandemic; however, climate change presents a long-term transitionary period that none of us alive today are likely to see the end of.
Thanks for the Jackie Mittoo music recommendation. I saw the Skatalites play at The prince of Wales in St Kilda maybe a decade ago, still with half the original members. They rocked steady. Today Spotify is set to ska.
Sustainable golf? Growing up at the beachside town of Raglan New Zealand (famous for the longest left hand run out surf in the world) the golf club got kicked off Maori land in the 80’s, but even then had sheep all over, not fenced off, only the putting greens were fenced off, electrically, later removed because the sheep learned not to go for that grass. When they relocated to a new hillier land they kept the sheep. Playing was so much fun. He sheep were at some risk from bad players, but I only ever remember hitting one, and it just shrugged it off and moved a bit. The sheep dung was not a real issue, we just cleaned up at the odd water hose, and then once more before getting back in the car.
You should check out Devon Russell’s vocal version of “Drum Song”.