This article discusses two covers of The Economist magazine. One cover focuses on the dangers of persistent inflation and the dilemma facing central bankers, while the other cover discusses Ukraine's future as a prosperous and democratic country.
The blog emphasizes that the war on inflation has been won and that a recession is coming, as indicated by various indicators such as CPI, recession probabilities, freight industry performance, and weak retail sales. The post also highlights the struggles in China's economy and suggests that investors should buy bonds.
Inflation is causing a decline in affordability for average working individuals, with prices on everyday necessities such as groceries, gasoline, and housing rising significantly in the past two years due to government spending and the Fed's money-printing.
As Jerome Powell, the chair of the U.S Federal Reserve, prepares to speak at the Jackson Hole symposium, the big question is whether he will signal a major shift in how central banks deal with inflation, particularly regarding interest rates and inflation targets. Some economists are suggesting moving the inflation target range from 2-3 percent, while others argue for higher targets to give central banks more flexibility in combating recession. The debate highlights the challenges of setting and changing formal inflation targets and the ongoing changes in the factors that drive growth and inflation.
Economists discuss the state of the U.S. economy, effects of Bidenomics, inflation outlook, and more.
Economist Jason Furman's belief that higher inflation stimulates investment is mocked by the reality of market dynamics, as evidenced by the fact that successful companies achieve massive valuations by lowering prices and providing more value to consumers.
Professor Isabella Weber's theory of seller's inflation, which argues that firms are passing on cost increases to consumers and benefiting from higher profits, has provoked controversy among economists and attracted attention from major media outlets. Weber's analysis challenges traditional economic theories on inflation and highlights the role of profits in driving price increases, potentially shifting the focus of policy measures towards addressing the power dynamics of capital in the market.
BlackRock's Rick Rieder suggests that the Federal Reserve can now end its inflation fight as the labor market in the US is cooling down after gaining 26 million jobs in the past three years.
Inflation has decreased significantly in recent months, but the role of the Federal Reserve in this decline is questionable as there is little evidence to suggest that higher interest rates led to lower prices and curtailed demand or employment. Other factors such as falling energy prices and the healing of disrupted supply chains appear to have had a larger impact on slowing inflation.
The article discusses how the rate of inflation has impacted processors, distributors, and other middlemen, with some benefiting from price increases but now at risk of a slowdown.
The war on inflation is almost over, as higher supply rather than lower demand has driven disinflation, creating a "Goldilocks" scenario in which inflation cools without a recession, according to economist Paul Krugman and a new report.
Central banks' efforts to combat inflation by raising interest rates have not led to mass job losses, as labor markets in various countries have cooperated by reducing open vacancies and trimming wage growth, suggesting a possible "soft landing" for the economy without significant casualties.
Despite assurances from policymakers and economists, inflation in the US continues to rise, posing significant challenges to the economy and financial stability.
"Inflation expectations can influence actual inflation, as people's behavior and attitudes towards the economy play a role in price changes," according to Joanne Hsu, director of the Surveys of Consumers at the University of Michigan.
