The inflation scare has subsided: Pandemic Was A Perfect Storm | Forexlive.

These old-time generals had style (AI image). I believe global central bankers may soon make a fatal error that will stunt economic development and growth. Central bankers always fight the last war and, once it becomes apparent that inflationary threats have passed, central bankers will continue their battle with recession risk. On Thursday, European Central Bank Chief Economist Philip Lane noted that firms have reported lower wage pressures. Their wage tracker also indicates much slower wage growth for 2025-2026. As time progresses, it will become clear that past inflation was simply caused by irresponsible forward guidance combined with out of control fiscal spending and supply shock – just one-off forces, which combined together resulted in only 9% inflation! No inflationary spike is apparent here – just an occasional bump along a disinflationary trend?The US Consumer Price Index serves to illustrate just how reckless our monetary policies were during these times. The Reserve Bank of Australia took measures including cutting its cash rate to 0.10%, purchasing $100 billion through quantitative easing over six months, pledged to purchase $5 billion worth of government bonds every week until February 2022, targeted 3-year note yields at 0.10 per cent and committed not raising rates until “at least” 2024 – all without raising rates! Global central banks engaged in similar easing sprees – they went ‘full nuclear’! Ten-year US note yields had fallen below 2% for two years – much closer to one percent at times! That money was practically free. Similar trends existed within governments: with no oversight whatsoever the US Paycheck Protection Program scam gave away over $800 billion without much concern from policy makers or anyone else. Much of that money found its way directly into small business owners’ wallets: $850 billion went directly into stimulus checks followed by another $900 dose in enhanced unemployment benefits costing $680 billion. Compare that to the financial crisis, which authorized loans totalling $700 billion that actually had to be paid back and led directly to inflation via supply chains. All that money and low-interest lending was going directly into consumers’ hands who, among other uses, decided to renovate, construct fences or decks or undertake renovation projects themselves. Lumber prices witnessed unprecedented escalations. Lumber futures rose steadily each month as supply chains in autos, computer chips, consumer goods, meat and steel were disrupted. Yet inflation levels remained at just 9 %! Not that it wasn’t painful — its effects could easily have reached 12-15% — yet somehow central banks treat this event like it’s become the new normal. Complicating matters further, we’ve witnessed a breakthrough of generative AI over the last 20 months. Deflationary measures will undoubtedly amplify this crisis, which I discussed yesterday with Bloomberg (near the end). Here’s more information: When economic history records its effects definitively, historians will highlight that pandemic was one-off event within an extended disinflatioary cycle caused by central banks keeping rates too high too long – likening this momentous occasion with one during which low borrowing rates may only ever arise once! I believe now could be another such golden moment: locking in high investment returns over longer duration akin to what happened during pandemic itself!