8.6% US Inflation, new Beijing lockdown and the case for 10% inflation in NZ

US inflation hit a staggering 40 year high by coming in far hotter than analysis’s had predicted.

There was a clear belief in the market that inflation for the quarter would be .7, it was 1 bringing the annual rate to 8.6%.

There was an immediate market sell off with the Dow dropping 880 points with the Nasdaq and S+P Alsop getting crushed.

There is now talk that the Fed will bring back the .75 rise option and even commentary that the Fed must raise the interest rate by a full point if the Fed want to get ahead of the Market.

This is all putting pressure on Orr to raise the OCR far more aggressively than he has told the market.

That is going to cripple mortgagee holders and send food prices soaring because it’s supply side dynamics that are causing the inflation, not higher demand.

Look at China and their zero tolerance policy towards Covid. Within the week of lifting some restrictions that have plagued over 50 megacities, representing almost 40% of China’s GDP, Beijing has had to go back into lockdown because of course, predictably, Covid has re-entered China.

This lockdown, re-open, back into lockdown dynamic is going to continue to damage global supply chains on top of the real possibility that the war in Ukraine is simply not going to end this year and Russian oil and basic metals and food sources will explode in price.

Add on top of this extreme drought and rain conditions that are damaging the agricultural calendar and we have the perfect storm of war, plague and famine.

The economic stress that is causing such malaise in NZ right now hasn’t even fucking started!

Things are about to get far grimmer.

Freaked out by Russian military aggression and Chinese threats? Wait till Israel bombs Iran.

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