Just over a year ago RBNZ Governor Orr was interviewed by Bloomberg Television & said:
"Inflation is a very different beast today than it was in the 1970s, giving central banks the confidence to look through a short-term spike in prices .. The fear of the 70s, the 80s, stagflation, it is such a different world . There is a single global price for so many of the raw materials, the intermediate inputs and the final consumer goods. We google that, we are prepared to wait. We don't go to the shop, we have it imported."
Central banks today are therefore "prepared to wait longer because they're more confident that we have stable inflation expectations, we have a much more flexible set of pricing, we have less of that generalized inflation," he said.
So how well has this far-reaching proclamation about the nature of macroeconomics, of globalization, of price setting behavior, of how inflation now is a different "beast" to the 70s, of how the "fear of stagflation" is a world away from us, not just for NZ, but for all, made such a short while ago, stood the test of time?
Golly, gee whiz. Practically the entire world is awash with headlines like the following from the World Bank to the Hindu in India to The Financial Times in London to the New York Times and more:
Stagflation Fears Surge and ‘Sentiment Is Dire’ in Bank of America Survey (Bloomberg)
Explained | How are fears of stagflation impacting markets? (The Hindu)
What Does Stagflation Mean for the Global Economy? (World Bank Podcast)
Stagflation looms in UK as economic growth grinds to a halt "The UK economic recovery stalled in February & March as inflation surged to its highest level in 30 years, in the worst combination of surging prices & zero growth since the 1970s". (Financial Times)
Bernanke’s Economic Warning"Bernanke, the former Federal Reserve chair who headed the central bank during the 2008 financial crisis, warns that the nation is headed for a situation, much like the 1970s, where Americans were losing their jobs but still facing higher prices at the grocery store and at the pump" (The New York Times)
Say no more.
Sources: