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Economic clouds gathering

25/01/2022

It’s going to be awful

Homepaddock

Steven Joyce opines on the gathering economic clouds:

. . . The sad fact is that the world economy is facing darker days ahead. Despite appearing to have skated smoothly through the pandemic, the pressures have been building up. Ironically, the very medicine that has made the pandemic seem so economically benign has created the pressures we now have to deal with. Like much in life, in economics it seems you can take your lumps now or later — but you will have to take them.

The most obvious problem remains inflation. Pretty much everyone now accepts that central banks and governments overshot the stimulus response. Inflation is not transitory as was the collective hope of policymakers last year. In the US it has now hit 7 per cent, the highest level in 40 years. Federal Reserve chair Jerome Powell has finally admitted inflation represents a “real threat” to…

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