Another rise in interest rates by the Reserve Bank (RBNZ) seems certain this week. The only issue is how large will it be.
As TDB has been warning from the beginning, the economic shockwave of Covid is here driven by supply side inflation caused by just in time global capitalism grinding to a halt.
The knock on effect of 5% inflation plus mortgage hikes caused by interest rates being forced up over the ocean of private debt is a fucking maelstrom of damage.
I argue we will face 10% inflation by December.
KiwiSaver accounts will diminish, mortgage rates and rents rise, food and petrol prices to continue to skyrocket as Russia’s war and China’s zero tolerance to Covid combine to create a force multiplier of risk, economic shockwaves and inflationary pressures.
Small business owners who have been alphas all their life and have grown attached to the liberty that liquid gives them are about to go belly up and that bitter resentment will feed ACT.
The poor are suffering beyond the financial fears of the middle classes, food banks are spiking 500% more demand and their overcrowded existence is ripe kindling for covid.
So can Orr’s bazooka help the economy as the real pain starts?
If all Orr has is a sudden jump in the interest rate to try and slow the almost 5% inflation, the ramifications of the true gravity from all that private debt becomes realized.
The problem as I see it is the inflation is being caused by unique supply side constrictions, so the only tool left is the ‘bazooka’, which Adrian Orr used last time with a .75 cut. If he needs to get ahead of a sudden spike in the cost of basics because ports are jammed solid it would need to be one enormous hand break.
Today saw a 50 point rise, if Orr is going to use the Bazooka to any effect, it’s next month with a 75 point or 100 point rise.
If he has to pull that hand break, we best hope there are airbags for everyone.
The steep rise in repaying the ocean of debt will suck money directly out of the pockets of people, many of whom are on the tipping point between functioning and desperate.
This leads to a plunge in consumer confidence, enormous financial pressures and the economy built on hospitality, tourism & retail withers as wave after wave of sickness and death trips the country back into a steep recession and brutal self imposed lockdown.
Without some radical package to help everyone rebuild from this pandemic, the economic carnage will mutilate whatever survives.
All of this was predictable and my only criticism of the Government’s response was the lesson we didn’t learn from the 2019 measles epidemic and that was the failings of their community outreach.
Maori and Pacifica health providers can reach communities that cracker DHBs can’t. When they are directly funded, public health goals can be achieved, that it’s taken so long to get them resourced is the main mistake and problem we have right now.
Otherwise, I applaud this Government’s desire to put people before money but taking that road means we have an obligation to help those damaged economically.
It’s time to think about taxation aimed at the wealthy, the banks and speculators to fund the rebuilding we need.
A financial transaction tax is that solution and Labour must consider it in a post Omicron economy where Billionaires are flying to space on self funded rockets.
The true political division in a Capitalist Democracy is not the colour of your skin or gender identity or genital tribalism, it’s between the 1% richest, their 9% enablers and the 90% rest of us!
Labour must think big on funding universal provision of services to survive the economic downturn and the new post-Covid reality in a climate warming world!
To fund these big services we need a new tax system. A Financial Transaction Tax penalises those who are the greediest while funding the services that benefit everyone.
-Free Public Transport: Rather than welfare increases that the cruel and insidious MSD clawback, put money back into the pockets of the poorest with free public transport, while reducing climate pollution AND making roads more free for those who need to use them. Free Public Transport would make voters care.
-Free Dental Services: Our lack of free Dental is a disgraceful outcome of free market neoliberalism over public health.
-Free Breakfast and lunches in all schools: Again, rather than welfare increases that the cruel and insidious MSD clawback, put money back into the pockets of the poorest with free Breakfasts and Lunches at school. With inflation and mortgage rates soaring even the children of the middle classes will benefit.
-Legalise Cannabis: FFS, it generates half a billion in revenue and justice system savings, just do it for Christ’s sakes you gutless wonders!
-30 000 State House Build: Rather than simply trying to fund flawed models of a rigged property market built for speculators, do mass State Housing builds for only State House tenants and owner occupiers with rent to own options. Build these on Golf Courses we seize back from Auckland and Wellington using the Public Works Act.
-4 day working week in all public services: Build a post growth movement by adopting it in the State sector first. Employ more state servants.
-Basic Pharmaceutical Industry: The continued post Covid world of geopolitical threats demands a level of self sufficiency we are no where close to.
-Tidal Energy Production: Towards our 100% renewable energy target.
-Universal Free Internet: Available through all Churches, Marae, Libraries.
-First $20 000 Tax Free: Most people earn barely $40 000, making the first $20 000 tax free would benefit the poorest first and most.
-Vice Tax on all Gambling, Tobacco & Booze: A special super tax on top of the total tax paid for products that are a blight upon society. Why should the Gambling Booze Vape Barons peddle their harmful products with the barest of responsibility?
-Sugar Tax: The Big Sugar Drug Dealers have been allowed to sell their highly addictive drugs directly to market with no penalty for too long. Time too pay punks.
-Remove GST from fresh fruit and vegetables: Make healthier choices cheaper, works best with a sugar tax.
-30% Stake-hold in Supermarket Duopoly: The broken market is creating a million dollars additional profit each day to the Duopoly. Fuck them. A new supermarket chain will reduce cost and voters need to see that in an inflation explosion.
A Financial Transaction Tax, Sugar Tax and a taxed Cannabis Market could fund new services, old services PLUS take the tax take off the poorest and put it on the richest.
It’s time to be radical because hoping Orr can kneecap a red hot economy addicted to the meth of quantitive easing is beyond optimistic, it’s delusional!
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