Article

2022-01-14 Economy

World's Largest Asset Manager: Central Banks Are Trapped As They Can't Fight Supply-Driven Inflation

[ZERO] Back in September, when the Fed was still lying to itself and to the people that inflation was "transitory", yet when the first hints the Fed would have to tighten soon emerged, we asked a simple question: "How Exactly Do Central Bankers Plan To Resolve Supply Chain Bottlenecks." It is a question that nobody has answered yet for the simple reason that there is no answer: the Fed can at best adjust demand-side inflation but when it comes to supply chain bottlenecks (which as we showed earlier today are about to get much worse), the central banks is completely helpless.

Fast forward 5 months when the same question appears to be bothering BlackRock Investment Institute’s global chief investment strategist, Wei Li, who said in a Bloomberg TV interview that central banks are in a "very tricky spot" this year as they try to fight inflation that’s driven by supply factors, and that at the same time, four rate hikes may not be enough to control price pressures.

As a result, she said that "it’s really difficult for central banks to stabilize inflation without destroying activity," which is precisely the point we have been making for weeks, when we say - over and over - that tightening into the current global slowdown will do nothing to address the supply-driven inflation and will instead send the economy into a stagflationary abyss, not to mention crash markets.

Or, as Li puts it, given inflation dynamics are supply-driven, "central banks should not lean too aggressively against inflation" as to not damage activity.

She also noted that the one silver lining is that growth is still "reasonably robust" but the economy is coming down from very elevated levels last year. As such the Fed may misinterpret continued slowdown with its policy working, when in reality it will only be making matters worse.

In any case, the Blackrock strategist expects "inflation to settle at levels higher compared with what we got used to, even as supply bottlenecks ease because of structural factors at play."

In terms of markets, the firm continues to prefer developed-market stocks to emerging markets through support from fundamentals with "okay" growth and earnings.

"We see a broader robust outlook for DM equities and this is where we’re having big conviction at the moment", although a few more days like today and we are confident that the world's largest asset manager will change its tune.

Posted by Besoeker 2022-01-14 01:17|| || Front Page|| [11130 views ] Top

#1 supply-driven inflation

Supply-driven inflation is the big lie, a mask for the actual problem. Supply and Demand is a good thing, it drives a free market. Government debt and borrowing cause the value of the dollar to fall. Costs go up (commonly referred to as inflation) as dollars are worth less.

If it's manufactured in Texas, Georgia, or Indiana, might take a week or two to get it (due to demand), but I doubt it will be "locked down."

If we make it here, we have some control over it. It it's made in China, the Communist Chinese control it. What am I missing ?

Posted by Besoeker 2022-01-14 01:29|| 2022-01-14 01:29|| Front Page Top

#2 Global Economy Heading For “Mother Of All” Supply Chain Shocks As China Locks Down Ports.

Posted by Blackbeard Barnsmell6454 2022-01-14 01:48|| 2022-01-14 01:48|| Front Page Top

#3 One thing we can be sure of: central bankers will put their interests ahead of our own, and will make sure we feel the pain before they do.

After all, they're the important people in society. The rest of us are just deplorable.

Posted by Sheter the Lesser9291 2022-01-14 07:30|| 2022-01-14 07:30|| Front Page Top

#4 The masking mandate has caused most the current troubles. Local Rocket center has just announced they will no longer require vaccine to work there. Truck drivers on strike so freight currently not moving because of vaccine requirement.Day by day hospitals backing off vaccine requirements because of severe shortage of medical personnel. The drum beat of media continues the news of mass hysteria of the unwashed un-vaccinated. The public is simply ignoring them now. Regarding China I welcome that. Their quality control stinks and has for some time now. My dad years ago said we needed cottage industries in every city. What a difference that would make. The powers that be will never learn. Short term fixes as always.

Posted by Dale 2022-01-14 07:33|| 2022-01-14 07:33|| Front Page Top

#5 It's all fun, games, and weasel wordings until national economies collapse.

Posted by Bubba Lover of the Faeries8843 2022-01-14 14:47|| 2022-01-14 14:47|| Front Page Top

09:43 Mullah Richard
09:27 Warthog
09:11 Mercutio
09:07 AlmostAnonymous5839
08:52 Matt
08:24 Matt
08:20 SteveS
07:43 Procopius2k
07:42 BrerRabbit
07:42 Procopius2k
07:39 Procopius2k
07:36 Procopius2k
07:35 Procopius2k
07:34 trailing wife
07:31 Procopius2k
07:30 NN2N1
07:22 NN2N1
07:18 trailing wife
07:14 Richard Aubrey
07:10 NN2N1
07:09 Besoeker
07:03 NN2N1
06:58 NN2N1
06:58 Besoeker