It’s Wednesday, and after doing other things for a week, I still haven’t hit full blogging velocity. But I got there. Today we’ll consider the latest inflation figures from Australia, some interesting tidbits from the Guardian and some bullshit on the US debt ceiling. Then visit Paris.
Australian Bureau of Statistics releases monthly inflation figures today
Today (January 11, 2022), the ABS published its — Monthly Consumer Price Index Indicator – November 2022.
Keep in mind that this monthly release is a new ABS innovation and does not include all of the relevant information that appears in the standard quarterly CPI release.
Its correlation is also about 6 weeks behind.
Data Display:
1. “The monthly CPI indicator rose 7.3% in the twelve months to November”, up from 6.9% in October and back to September 2022 levels.
Should we be worried?
When we dig a little deeper, we see a big jump in motor fuels in November 2022 — from 11.8% to 16.6% annualized.
But aren’t oil and gasoline prices falling everywhere in the world?
Answer: Yes.
So what is given?
The answer is that the federal government has ditched the 22-cent excise tax cut implemented by the previous administration.
This largely explains the increase in gasoline prices.
So it has nothing to do with the state of the fiscal deficit or total spending.
Purely an administrative decision, it usually drives prices independently of the state of the economy, and is often ignored by commentators bent on somehow blaming excessive deficits, etc.
Also, housing (new dwellings), which had been driving the CPI before, saw a sharp drop in price gains in that segment in November.
I can personally testify that restrictions on new construction are decreasing as more materials become available.
Food remains a major factor, the ABS noted:
Prices rose across all food categories in the twelve months to November. These increases reflect a range of price pressures, including supply chain issues and higher input costs…
Fruit and vegetables rose 9.5 percent in the year to November. This subpopulation continues to be affected by flooding, heavy rainfall and hail in key growing areas, while also being affected by high transport and fertilizer costs.
There are currently terrible floods in Australia, leading to shortages of supplies.
Additionally, OPEC price gouging is affecting supply chains by raising transportation costs.
Travel costs are similarly affected.
All of these factors are transitory and (largely) independent of the state of demand.
The data makes absolutely no case for further rate hikes, even if the RBA will continue to do so – because it can.
british guardian tell the truth
I like the Guardian editorial (January 2, 2023) – The Guardian view on excessive unemployment: causing needless suffering – This supports my point:
…current inflation is temporary…
This means there is no reason for central banks to go out of their way to create recessions and mass unemployment.
One comment said (me and The Guardian):
It is extremely bold to look to Japan and its central bank as a model to follow.Japan was looking more and more like the Titanic before it hit an iceberg
Not at all bold.
Grounded in reality and experience.
The mainstream has been predicting that Japan will hit an iceberg for about 3 years. As each prediction fails, a new (same) one follows it, only to satisfy its own failure.
Japan certainly has problems, but they have nothing to do with public finances or central bank policy.
I suggest these reviewers go and live there for a while and find out what’s going on.
Anyway, this kind of comment is followed by accusations that I’m an “asshole” – FYI: In a drawer in my office, I have a birth certificate that says my birth was two deceased married adults .
But this reviewer has a plan for me:
…should be abandoned on a fertile desert island…
It actually sounds pretty good, as long as there’s some surf and runway.
Another commentator, who goes by the name “I am not an economist,” had previously concluded based on some economic facts that “it is madmen, madmen, and pure madmen to suggest that we follow the example of the Bank of Japan.”
The commentator is definitely not an economist, and I suggested he go live in Japan and see how crazy the place is – top notch education, healthcare and transport systems, extremely low unemployment, housing supply, etc.
I decided not to read any further.
Other commenters come from what I consider to be complementary to my work – thanks.
Ridiculous comments about the debt ceiling
Some journalists are more ridiculous than others as they strive to be headlines that herald impending doom and rob readers of their money.
This article – The U.S. may now be closer than ever to defaulting on its debt (January 9, 2022) – In keeping with that tradition, the author is a serial offender.
Titles are meant to scare.
The US is (probably) running out of money.
That would be a scary prospect, unless you think about it and understand that the realistic prospect becomes ridiculous.
We’re approaching the perennial “debt ceiling” pantomime that makes US policy makers look downright stupid as they swagger speeches and threaten to turn off the spigot and stuff like that.
Even progressives got caught up in the game and started tweeting profusely about minting a trillion dollar coin, which is equally ridiculous in my opinion.
the US government has no way Defaults and debt limits have existed since 1917.
But there is a strange disconnect in the American system, where the President and Congress may not represent the same political influence, partly because of the presidential election/midterm election cycle.
Typically, Congress is taken over by the president’s rival political forces as a statement of what Americans think of the president’s first two years of performance.
This is the case now, when Republicans won a majority in the House and were effectively matched with Democrats in the Senate (though 3 independents balanced the Senate).
The question then is whether the pressure to use the debt ceiling to cut spending and/or raise taxes (often the former) is simply a legitimate expression of the will of the people expressed through majority representation.
Tensions arise because the president’s “will” precedes Congress’s “will” by two years, and it’s this misalignment that usually fuels the pantomime.
An odd aspect of the commentary surrounding this issue is that pundits always claim that “failure to raise the ceiling and a US government debt default would be catastrophic”.
Apparently, corrupt rating agencies predict that if the cap stays at current levels, GDP will collapse dramatically, unemployment will rise by around 6 percentage points, and wealth will plummet.
Yet they never questioned the economic damage that cutting spending would do.
Also, the article quoted above talks about “the carnage in the US bond market and the collapse of the dollar”.
into the central bank.
Its charter is to preserve financial stability, and if there is a possibility of a “carnage” or “catastrophe” that disrupts the financial system, then the Fed will have to act.
what can it do
Simply write off any debt it currently holds.
At this time last week, the bank held $5,457.751 billion worth of U.S. Treasury securities.
Writing it off would render the current debt ceiling irrelevant.
No matter what the Fed might do, it is required by law to deal with financial instability and has all the monetary power to do almost anything.
The House of Representatives’ recent prank attempt to elect a Speaker taught the world just how crazy these characters are.
But the debt ceiling will rise — just as day follows night and vice versa.
Music – Journey to Paris
Here’s what I’ve been listening to this morning at work.
Here’s some post-minimalist music to soothe the soul.
This is a very short (1:15) track – Willing Street – by one of my favorite post-minimalist composers, Max Richter, whose works are from – previous songs – 2006 album.
This is a very beautiful piece of work.
Like most post-minimalist compositions, and Max Richter’s playing in general, its structure seems relatively simple. But try playing it on the piano – getting the timing just right is a seemingly difficult composition.
Try to match the sound of the piece with the actual streets of Paris 20ème that inspired the music.
Here’s a short clip of the street and how it’s been used in movies over the years.
This is one of my favorite areas in Paris with Belleville Park at the top. But don’t be misled by these old movies. Most of the buildings are gone, replaced by modern apartment blocks, and the soul of the place is gone.
Enough for today!
(c) Copyright 2023 William Mitchell. all rights reserved.
