Worse is coming and the markets seem to be in complete denial about it.
Oil has only really maintained the ~$100/barrel price because of record SPR releases worldwide. Also, that $100 price is kinda fake because it's a future price. The spot prices got much higher. Well, that runway is coming to an end. If the Strait of Hormuz re-opened today , we'd still be facing an energy shock. Plus there's famine coming.
Now the US won't run out of oil or refined petroleum products. The uS is now a net exporter. But it's a global marekt so the prices are going to go way up. And some countries and heavily dependent on oil for electricity. They are going to face blackouts.
So even though fertilizer shortages are skewed towards the Global South, food prices too are global so they're going up too.
In 1973, the energy shock took ~6 months to manifest [1].
But I think the real problem is dynamic pricing. Inflation is insidious. People start raising prices on the expectation of rising prices, thus causing prices to rise. But so many industries now are going well beyond that by essentially colluding through AI tools (eg RealPage) to further raise prices.
I honestly don't know how this ends without a deep, long recession.
[1]: https://paulkrugman.substack.com/p/oil-crises-past-and-possi...
When I was in high school I was a reckless driver, and with each narrow escape, I became more confident and certain that I was in control and a bad outcome wouldn't happen, couldn't happen. Your comment was downvoted with the same hubris. Success is not a teacher.
> don't know how this ends without a deep, long recession
The same way Powell ended the last one without a deep, long recession.
You mean with the greatest wealth transfer to the wealthy in history that added a quarter to our entire national debt? Yeah, you can't do that often.
The US national debt is about to hit $40 trillion. It was $20 trillion 9 years ago.
What Trump and Biden should've done is implemented a windfall profits tax of probably 80%. But there's absolutely zero chance of that happening by either party.
> mean with the greatest wealth transfer to the wealthy in history that added a quarter to our entire national debt?
The national debt was added before the inflation took hold to counter the Covid recession. (When the MMT nutters were at the helm.)
Powell cured the resulting inflation without causing a recession. He did that without adding anything to our national debt.
> What Trump and Biden should've done is implemented a windfall profits tax of probably 80%
This just creates a political game of defining what is and isn't a windfall. A progressive corporate tax achieves what I think you want to without the side effects.
Either way, the playbook for getting out of this is steeply increasing rates and then moderating them before inflation hits target.
> Powell cured the resulting inflation without causing a recession. He did that without adding anything to our national debt.
That doesn't actually seem like a huge achievement. Inflation is the rate of change so if you stop creating as much money out of thin air, then it's not really a surprise that prices don't increase as much.
> That doesn't actually seem like a huge achievement
Historically, it has been.
> Inflation is the rate of change so if you stop creating as much money out of thin air, then it's not really a surprise that prices don't increase as much
You're confusing money supply and price levels. Inflation measures the latter. You can have constant money supply and stable prices, inflation or deflation. And since most money is privately created, controlling how much money is and isn't created "out of thin air" is actually quite challenging.
> You're confusing money supply and price levels.
They're closely related.
> And since most money is privately created, controlling how much money is and isn't created "out of thin air" is actually quite challenging.
It's the central bank which controls the interest rates, the reserve requirement and other stuff which affects it.
> They're closely related
But not the same. In this case, the difference is material.
> It's the central bank which controls the interest rates, the reserve requirement and other stuff which affects it
Affects. But does not control. That's what makes it challenging.
To my memory, a soft landing from 5+ percent inflation has been achieved precisely once in modern monetary history. (And not for lack of trying.)