Inflation or dumbflation?

Nordea with the note:

Inflation or dumbflation?

First, as the pandemic unfolds, you tell your population to hug Chinese people and call limiting international flights “xenophobic”. Soon thereafter, the media coverage of the virus scares the population so they stay indoors. And if they don’t, you lock them down. (In the US, Democrat voters believe it’s a 1-in-3 risk of hospitalisation from COVID-19 vs the actual risk of < 1%, according to a survey from September 2021.)

Now the composition of demand has changed towards goods and away from services, which drives inflation due to component shortages, increased energy consumption, supply chain bottlenecks – on top of goods prices being more variable…

Chart 1: Composition of demand still inflationary

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.