Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24
Micro Strategy Bubble Mania - 10th May 24
Biden's Bureau of Labor Statistics is Cooking Jobs Reports - 10th May 24
Bitcoin Price Swings Analysis - 9th May 24
Could Chinese Gold Be the Straw That Breaks the Dollar's Back? - 9th May 24
The Federal Reserve Is Broke! - 9th May 24
The Elliott Wave Crash Course - 9th May 24
Psychologically Prepared for Bitcoin Bull Market Bubble MANIA Rug Pull Corrections 2024 - 8th May 24
Why You Should Pay Attention to This Time-Tested Stock Market Indicator Now - 8th May 24
Copper: The India Factor - 8th May 24
Gold 2008 and 2022 All Over Again? Stocks, USDX - 8th May 24
Holocaust Survivor States Israel is Like Nazi Germany, The Fourth Reich - 8th May 24
Fourth Reich Invades Rafah Concentration Camp To Kill Palestinian Children - 8th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Global Inflation Surges, Central Banks Losing Control and Triggered the Wage Price Spiral?

Economics / Inflation Feb 28, 2017 - 08:34 PM GMT

By: Nadeem_Walayat

Economics

Whilst in Britain, inflation focus is on the surge in prices following the BrExit vote that triggered a 20% drop in sterling which is slowly but steadily feeding its way through the supply chain and heralds a nightmare 2017 for already distressed retailers such as Tesco, Britain's biggest retailer that is literally facing a crisis which I have been covering in a series of videos the latest of which follows a BBC investigation into its 'fake' shelf prices duping customers into buying products at expired offer prices.


The implications of sterling's sharp drop are obviously inflationary and resulting in an increase the price of imports and therefore has been exerting upwards pressure on shop prices as suppliers restock at the lower sterling exchange rate. The most recent inflation data for January 2017 has RPI rising to 2.6% from 1.4% before Brexit and CPI at 1.8% against pre-Brexit CPI 0.6%. Whilst factory gate price inflation have risen to 3.5%.

However what's worse is that Britain's inflation trend goes beyond the temporary Brexit factor and is becoming subject to an global inflation surge as a consequences of 8 years of central bank zero interest rates and rampant money printing as the US CPI inflation graph illustrates.

US CPI jumped sharply higher to 2.5% up from 1.7% the month before. Given the sharp trend trajectory of the US CPI inflation one would wonder if it was the US that had voted for Brexit triggering a 20% drop in the Dollar rather than Brexit sending sterling plunging.

Similarly Germany the bastion of price stability is also witnessing the early signs of an surge in inflation, rising to its highest level for 3 years at 1.7%, with the economic basket cases such as Spain not far behind on 1.4%, that collectively have sent euro-zone inflation soaring to 1.8% up from 1.1% the month before, which is a far cry from the deflation expectations of economies that have remained in economic stagnation, even depression for the past 6 years.

Meanwhile the euro-zone nation that has suffered the most from being tied to the German Economic Empire, Greece, whilst continuing to have a shrinking economy i.e. likely to experience a further contraction of about 1% for 2017, an economy some 25% smaller than where it was 7 years ago whilst at the same time having been loaded with an additional $400 billion bailout debt burden that ensures Greece remains permanently bankrupt. Nevertheless Greece is also witnessing a surge in inflation to 1.5% up from 0.3% the month before. Which illustrates that regardless of the fundamentals of domestic economies, the euro-zone nations are all tied to Germany, so if Germany experiences sharply rising prices then so will the whole euro-zone.

The big question mark is the surge in global inflation temporary or are we about to finally see runaway inflation as a consequence of the world central banks collectively having conjured some $20 trillion out of thin air and printed about $100 trillion in additional debt to save the bankrupt banking crime syndicate. Rampant money printing that asset prices such as housing and stocks have already greatly leveraged themselves to in the mother of all bull markets.

Well definitely there is at least some seepage coming out of the banking / asset price system towards feeding the wage (including in work benefits) price spiral, the consequences of which will be for the further loss of purchasing power of savings / bond investments and earnings. Whilst continuing to inflate the price of assets that cannot be easily printed such as housing.

Which implies to expect a far higher and sustained spike in UK inflation during 2017 as the temporary Brexit inflation becomes absorbed into a global surge in inflation the real world consequences will be one of a 10% hike in UK food prices during 2017 that will have a severe impact on consumers who are already facing energy price hikes of as much as 14% from the likes of NPower with the City Councils warning of 10%+ council tax hikes to cover the shortfalls in central government funding, all of which is leading towards a perfect storm for the retail sector triggering job losses and store closures.

Therefore the key indicator to watch for the inflation mega-trend driver for 2017 is wage inflation that I suspect WILL rise that would sow the seeds for UK interest rate hikes during 2017, for the one thing that central banks fear the most is triggering the wage price spiral.

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2017 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 30 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

R.E.B
01 Mar 17, 21:10
Where is my deflation?

But, But, what happened to the deflationary collapse? The stock market should have been wiped out by now, gold should be £300 an ounce and I should be able to buy a car for a sack of potatoes a la 1932!!! Did I miss something?


Nadeem_Walayat
02 Mar 17, 17:29
Inflation

There hasn't been any deflation, apart from a month or two.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in