American appetite for consumer debt dims; Fed officials say they are far from winning against inflation; India raises policy rate; Aussie cost pressure intensifies; UST 10yr 3.68%; gold and oil little-changed; NZ$1 = 63.2 USc; TWI-5 = 70.4

Pollyanna chorus sang for their supper but way premature. Negative rates cannot control inflation led by USA. Will take another year and some to get rates higher than inflation 

I'm still surprised our lot haven't shifted the tax brackets yet. 

Well not surprised... "resigned to a constant feeling of disappointment" might be more accurate. 

Banker's and deficit spending governments (most of the western world), have created this inflationary environment (just a tax on us savers and wage earner's), for their own benefit.  They have no interest in stopping inflation, the end of fiat currency is near.  Lucky for the grandkids, they won't have to pay it back.  Greta will be debt free.

It's a long way to actual deflation.

Timeline of stupidity....

RB need to lower inflation.

Hipkins knows inflation is a huge problem 

Hipkins raises minimum wage!

every employer raise prices

Prices increase inflation grows

The poor get poorer

The rich get richer 

FFS they haven't a clue and 40% of NZ voters can't see the insanity and still like these morons.

This is vote buying for the stupid!

Wages up as spending shrinks does not make jack a happy boy. 

In late-released data yesterday, the American appetite for consumer credit slowed unexpectedly in December, rising a tiny +US$12 mln in the month, when a small +US$25 bln was expected. Their appetite for consumer credit is unusually restrained at present, perhaps because interest rates rises are making it unattractive.

As I pointed out yesterday the constraint in credit for this cohort is from the supply side.

by Audaxes | 12th Oct 22, 12:25pm

On our planet earth – as opposed to the very different planet that economists seem to be on – all markets are rationed. In rationed markets a simple rule applies: the short side principle. It says that whichever quantity of demand or supply is smaller (the ‘short side’) will be transacted (it is the only quantity that can be transacted). Meanwhile, the rest will remain unserved, and thus the short side wields power: the power to pick and choose with whom to do business. Examples abound. For instance, when applying for a job, there tend to be more applicants than jobs, resulting in a selection procedure that may involve a number of activities and demands that can only be described as being of a non-market nature (think about how Hollywood actresses are selected), but does not usually include the question: what is the lowest wage you are prepared to work for?

Thus the theoretical dream world of “market equilibrium” allows economists to avoid talking about the reality of pervasive rationing, and with it, power being exerted by the short side in every market. Thus the entire power dimension in our economic reality – how the short side, such as the producer hiring starlets for Hollywood films, can exploit his power of being able to pick and choose with whom to do business, by extracting ‘non-market benefits’ of all kinds. The pretense of ‘equilibrium’ not only keeps this real power dimension hidden. It also helps to deflect the public discourse onto the politically more convenient alleged role of ‘prices’, such as the price of money, the interest rate. The emphasis on prices then also helps to justify the charging of usury (interest), which until about 300 years ago was illegal in most countries, including throughout Europe.

However, this narrative has suffered an abductio ad absurdum by the long period of near zero interest rates, so that it became obvious that the true monetary policy action takes place in terms of quantities, not the interest rate.

Thus it can be plainly seen today that the most important macroeconomic variable cannot be the price of money. Instead, it is its quantity. Is the quantity of money rationed by the demand or supply side? Asked differently, what is larger – the demand for money or its supply? Since money – and this includes bank money – is so useful, there is always some demand for it by someone. As a result, the short side is always the supply of money and credit. Banks ration credit even at the best of times in order to ensure that borrowers with sensible investment projects stay among the loan applicants – if rates are raised to equilibrate demand and supply, the resulting interest rate would be so high that only speculative projects would remain and banks’ loan portfolios would be too risky.

The banks thus occupy a pivotal role in the economy as they undertake the task of creating and allocating the new purchasing power that is added to the money supply and they decide what projects will get this newly created funding, and what projects will have to be abandoned due to a ‘lack of money’.

It is for this reason that we need the right type of banks that take the right decisions concerning the important question of how much money should be created, for what purpose and given into whose hands. These decisions will reshape the economic landscape within a short time period.

Moreover, it is for this reason that central banks have always monitored bank credit creation and allocation closely and most have intervened directly – if often secretly or ‘informally’ – in order to manage or control bank credit creation. Guidance of bank credit is in fact the only monetary policy tool with a strong track record of preventing asset bubbles and thus avoiding the subsequent banking crises. But credit guidance has always been undertaken in secrecy by central banks, since awareness of its existence and effectiveness gives away the truth that the official central banking narrative is smokescreen. Link

Min wage up again is petrol on the inflation fire. Just underpinned a 100bp increase.

Interesting that Mr. Market chose this moment to fight the FED. The rally looks far too early to me.

A couple of consecutive quarters of declining inflation though and the fight would be on.

"the American appetite for consumer credit slowed unexpectedly in December, rising a tiny +US$12 mln in the month, when a small +US$25 bln was expected."

Confusion between mln and bln here methinks ... which is it?

Japan another country that never recovered from 2020 (or 2008; or 2001; or 1997; or 1994; or 1990). But unlike here or Europe, until recently they didn't even have the nominal increases to pretend the economy was fine as we all did here. Link

Going to see so much more of this in 2023:

https://www.nzherald.co.nz/business/asb-owed-54m-by-earthworks-company-…