The world can kiss goodbye to an economic soft landing. Western central banks are on a misguided mission to restore their damaged credibility, tightening monetary policy violently after the post-pandemic recovery has already wilted and output is nearing contractionary levels.
Britain’s fiscal blitz has the luck of timing. It is a counter-cyclical stimulus, cushioning some of the blow, even if it risks rattling bond vigilantes, and even if it is wasteful in subsidies for the affluent.
Critics say the energy bailout will cap inflation in the short run but stoke more inflation in the long run, to which one can only reply, like Keynes, that in the long run we are all dead. World events are going to wash over such quibbling with a torrential deflationary force.
The central banks are pushing through with triple-barrelled rate rises after the inflation fever has broken; after the commodity boom has deflated; and after key monetary indicators on both sides of the Atlantic have turned negative. They are prisoners of lagging indicators.
✍️"Inflation will abate gradually of its own accord across the Atlantic world, without the need for a punishment beating by central banks with bad models. Boom-bust monetary policy is frankly a scandal," writes Ambrose Evans-Pritchard https://t.co/InfJuu0hpD
— The Telegraph (@Telegraph) September 23, 2022