In a recent podcast both Jim and Chris saying now not the time to raise interest rates by ECB.
Both also claimed it’s only mainly energy or oil causing the high inflation.
These are totally incorrect. inflation was high before Ukraine crisis. Everything has been going up in prices past few years.Also the ECB have printed trillions before the covid came along and kept rates low for over 10 years. Ye are too soft on the ECB on their role in all this and the mess they have created by a loose monetary policy for years. Time to call them out.
This topic is going to dominate economic discussions for the foreseeable. I think nobody has a right answer to this, we’ve only our own hypotheses to go on.
Inflation is incredibly complicated. To try and understand it, I think we need to break it down into its component parts and consider both supply and demand effects and their time lags.
Although according to our economic textbooks loose monetary policy typically leads to inflation, we have to acknowledge that before COVID (and Ukraine) - which were supply shocks - loose monetary policies in many economies were a plentiful, and inflation nowhere to be seen. Why was that? Was all this cheap money simply being saved up only to be unleashed in recent years? I doubt it.
I think what we’ve seen leading up to covid is inflation in some sectors but not in others - the “others” being sectors which are subject to globalisation and automation eroding the cost base. I think that’s why we have seen spiralling housing and construction costs (and the societal problems that come with that) but overall inflation at almost zero pre-COVID. Deflation in other sectors offsets.
What’s changed since COVID where we’ve seen inflation emerge? At risk of going a bit too David McWilliams on the buzzwords, we’ve seen “slowbalisation” - the foot taken off the brake of a big inflation dampener.
It’s all supply shock from what I can see rather than demand. And supply of stuff outside of the eurozone, which has nothing to do with the ECB in my opinion.
On the contrary there could be an argument to be made about savings being unleashed but that has more to do with lockdown savings than ECB policy I would argue.
I’m also at risk of sounding like an apologist for the ECB (I can be critical of them too!) but i think we should be humble enough to acknowledge that it’s the first time in history we came out of a lockdown response to a pandemic. It was hard to pre-empt what those economics were going to look like. Inflation could have been transitory for all anybody knew.
Thanks for your reply, inflation was there before covid in houses, rent , insurance, health, stocks markets. Now it’s just hitting all parts of economy. ECB kept rates too low too long and printed trillions and taught they get away with it.
Probably done to save Italy and Spain.
You had economists like Paul krugman and others (David macwillims)saying MMT was a great idea. Notice they have gone very quite since.
So I disagree with comments inflation nowhere to be seeing.
Officially it’s 8% for the year but probably higher In real terms.
Central banks and governments won’t tackle this issue head on as it will lead to recession so inflation will win in the end.
Just to clarify, I said inflation is nowhere to be seen in the years leading up to the pandemic (and by that I mean the CPI).
I agree that MMT is utter nonsense. I’ve also noted how Keynesianism has gone out of fashion too. For example, Mary Lou McDonald described herself as a follower of Keynesian economics on the Late Late Show once, and I’ve been waiting patiently for inflation to return to see if she sticks to her supposed economic principles :-)
I actually agree with much of what you have said. It’s a fair argument to say monetary policy pre-pandemic had a huge role to play in managing bubbles in long dated assets such as property - and that was very much foreseen. But it’s worth noting that the ECB are mandated by law to follow their 2% inflation target in aggregate. And prior to the pandemic, they actually undershot that mandated target. They’re not mandated to break down inflation by sector, and deliver deflation in aggregate just to manage property bubbles - and maybe they should have been!
But I do think it’s difficult to argue that the monetary policy has been the biggest driver of inflation post pandemic, when what has actually happened is the supply chain goalposts have moved rapidly to dramatic and unforeseen effects. If those events never happened, would we have seen inflation return like it has? Probably not in my opinion.
The pandemic was an excuse to keep the money printing going even stronger. Mary Lou hasn’t a clue about economics it’s spend spend and spend easy in opposition to shout populist policies. Politicians in general just want to give good news and concentrate on the short term. Even the way governments measure inflation is flawed the rate is way higher than the official one. I keep hearing people say well it you take out energy and food increases it ain’t too bad.
That’s like saying bar the goals we conceded we would have won the game in sport.
ECB getting an easy ride from the media. Covid payments went on way too long with little or no checks.now the consequences are hitting home and governments just blame Ukraine crisis to get them off the hook.
Again it’s either a recession or inflation to choose from and inflation will win.
Jim, Chris, thanks again for a super podcast. One point that I'd like to pick-up on relates to the rent inflation number from the CSO, quoted at 11.9%. There is much misleading information regarding rent inflation in Ireland and this is a big part of it. The most recent Daft.ie Report showed that rent levels for most tenants in Ireland are remarkably stable with inflation averaging 2% for over 300,000 sitting tenants - these sitting tenants are not experiencing 11.9% inflation. So the 2% relates to a massive number of tenants - these are real people. The most recent Daft.ie Rent Report showed inflation in advertised properties at 11.7%, but this rate actually applies to only a tiny percentage of the private rental market - those properties advertised as available to rent at a point in time. For example today there are just 828 properties available to rent in the entire country and this number is pretty stable throughout this year. The main statistics which media and opposition politicians quote from the Daft Report are based only on properties advertised on Daft.ie for a given period i.e. properties with no sitting tenant and advertised as available for rent, supply of which is dominated by the large investment funds.
In a recent podcast both Jim and Chris saying now not the time to raise interest rates by ECB.
Both also claimed it’s only mainly energy or oil causing the high inflation.
These are totally incorrect. inflation was high before Ukraine crisis. Everything has been going up in prices past few years.Also the ECB have printed trillions before the covid came along and kept rates low for over 10 years. Ye are too soft on the ECB on their role in all this and the mess they have created by a loose monetary policy for years. Time to call them out.
Hi Conor.
This topic is going to dominate economic discussions for the foreseeable. I think nobody has a right answer to this, we’ve only our own hypotheses to go on.
Inflation is incredibly complicated. To try and understand it, I think we need to break it down into its component parts and consider both supply and demand effects and their time lags.
Although according to our economic textbooks loose monetary policy typically leads to inflation, we have to acknowledge that before COVID (and Ukraine) - which were supply shocks - loose monetary policies in many economies were a plentiful, and inflation nowhere to be seen. Why was that? Was all this cheap money simply being saved up only to be unleashed in recent years? I doubt it.
I think what we’ve seen leading up to covid is inflation in some sectors but not in others - the “others” being sectors which are subject to globalisation and automation eroding the cost base. I think that’s why we have seen spiralling housing and construction costs (and the societal problems that come with that) but overall inflation at almost zero pre-COVID. Deflation in other sectors offsets.
What’s changed since COVID where we’ve seen inflation emerge? At risk of going a bit too David McWilliams on the buzzwords, we’ve seen “slowbalisation” - the foot taken off the brake of a big inflation dampener.
It’s all supply shock from what I can see rather than demand. And supply of stuff outside of the eurozone, which has nothing to do with the ECB in my opinion.
On the contrary there could be an argument to be made about savings being unleashed but that has more to do with lockdown savings than ECB policy I would argue.
I’m also at risk of sounding like an apologist for the ECB (I can be critical of them too!) but i think we should be humble enough to acknowledge that it’s the first time in history we came out of a lockdown response to a pandemic. It was hard to pre-empt what those economics were going to look like. Inflation could have been transitory for all anybody knew.
I’d appreciate your thoughts on all the above.
Hi Sean
Thanks for your reply, inflation was there before covid in houses, rent , insurance, health, stocks markets. Now it’s just hitting all parts of economy. ECB kept rates too low too long and printed trillions and taught they get away with it.
Probably done to save Italy and Spain.
You had economists like Paul krugman and others (David macwillims)saying MMT was a great idea. Notice they have gone very quite since.
So I disagree with comments inflation nowhere to be seeing.
Officially it’s 8% for the year but probably higher In real terms.
Central banks and governments won’t tackle this issue head on as it will lead to recession so inflation will win in the end.
Just to clarify, I said inflation is nowhere to be seen in the years leading up to the pandemic (and by that I mean the CPI).
I agree that MMT is utter nonsense. I’ve also noted how Keynesianism has gone out of fashion too. For example, Mary Lou McDonald described herself as a follower of Keynesian economics on the Late Late Show once, and I’ve been waiting patiently for inflation to return to see if she sticks to her supposed economic principles :-)
I actually agree with much of what you have said. It’s a fair argument to say monetary policy pre-pandemic had a huge role to play in managing bubbles in long dated assets such as property - and that was very much foreseen. But it’s worth noting that the ECB are mandated by law to follow their 2% inflation target in aggregate. And prior to the pandemic, they actually undershot that mandated target. They’re not mandated to break down inflation by sector, and deliver deflation in aggregate just to manage property bubbles - and maybe they should have been!
But I do think it’s difficult to argue that the monetary policy has been the biggest driver of inflation post pandemic, when what has actually happened is the supply chain goalposts have moved rapidly to dramatic and unforeseen effects. If those events never happened, would we have seen inflation return like it has? Probably not in my opinion.
The pandemic was an excuse to keep the money printing going even stronger. Mary Lou hasn’t a clue about economics it’s spend spend and spend easy in opposition to shout populist policies. Politicians in general just want to give good news and concentrate on the short term. Even the way governments measure inflation is flawed the rate is way higher than the official one. I keep hearing people say well it you take out energy and food increases it ain’t too bad.
That’s like saying bar the goals we conceded we would have won the game in sport.
ECB getting an easy ride from the media. Covid payments went on way too long with little or no checks.now the consequences are hitting home and governments just blame Ukraine crisis to get them off the hook.
Again it’s either a recession or inflation to choose from and inflation will win.
Jim, Chris, thanks again for a super podcast. One point that I'd like to pick-up on relates to the rent inflation number from the CSO, quoted at 11.9%. There is much misleading information regarding rent inflation in Ireland and this is a big part of it. The most recent Daft.ie Report showed that rent levels for most tenants in Ireland are remarkably stable with inflation averaging 2% for over 300,000 sitting tenants - these sitting tenants are not experiencing 11.9% inflation. So the 2% relates to a massive number of tenants - these are real people. The most recent Daft.ie Rent Report showed inflation in advertised properties at 11.7%, but this rate actually applies to only a tiny percentage of the private rental market - those properties advertised as available to rent at a point in time. For example today there are just 828 properties available to rent in the entire country and this number is pretty stable throughout this year. The main statistics which media and opposition politicians quote from the Daft Report are based only on properties advertised on Daft.ie for a given period i.e. properties with no sitting tenant and advertised as available for rent, supply of which is dominated by the large investment funds.
Best wishes,
Mark