June 11, 2021 - 4:10pm
How worried should we be about the latest inflation figures from America? A 5% rise from May 2020 to 2021 is a big jump. In fact, prices haven’t gone up that fast since 2008.
What’s going on? There are two nightmare scenarios — and both could be true. The first is that the impact of the pandemic has disrupted global production so badly that supply hasn’t a hope of matching demand anytime soon. The second is that government has overdone stimulus spending thus unleashing the inflationary monster.
If one or both of those scenarios are right then prices will keep rising fast for the foreseeable future. At the extreme we could find ourself trapped in 1970s-style inflationary spiral.
But don’t despair just yet — there are some less terrifying explanations.
After the unprecedented disruption of the pandemic, it’s unsurprising that the supply side needs a bit of time to soak up the bounce back in demand. In fact, an inflation rate still in single digits is proof that the global economy can adjust to just about anything these days.
Also don’t forget where we were a year ago. Stuck in deepest lockdown, consumers slashed their spending and entire industries closed their doors. Demand fell fast and so did many prices. The crude oil price even went negative for a while. So measured against that low point, a bit of inflation is entirely to be expected.
So who’s right, the Jeremiahs or the Pollyannas?
The short answer is that it’s too soon to tell. The longer answer is that we need to look beneath the hood of the headline figure and examine the different components of inflation. For instance, the US figures show that food prices are up by 2.2% (not too scary) while energy costs are up by 28.5% (not too shocking, given the volatility of that sector).
We should be worried about the continuing rise in house prices, but that was a problem long before the pandemic. Wage inflation is something we probably can blame on Covid, with restrictions on movement causing labour shortages, but should we panic about workers getting paid more?
Above all, we need to look beyond the short-term. The release of pent-up demand won’t keep the economy going forever. So instead of piling in with stimulus when and where it isn’t needed, governments would do well to husband their resources. The post-Covid boom could be short-lived and after that we’ll need properly funded policies to tackle the deeper weaknesses of the economy.
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SubscribeMaybe his “don’t humiliate Russia” comment at the very moment Russia was pounding Ukraine to smithereens, was a bit much for even the famously self-absorbed French.
According to a survey by the ECFR, 41% of the French are in the “peace camp” (Europe should seek to end the war as soon as possible – even if it means Ukraine making concessions ) versus 20% who belong to the “justice camp” (the most important goal is to punish Russia for its aggression and to restore the territorial integrity of Ukraine) : https://ecfr.eu/publication/peace-versus-justice-the-coming-european-split-over-the-war-in-ukraine/
Perhaps Le Pen’s clear defeat in the second round of the presidential election in April really galvanised RN’s supporters and that’s why they came out in force yesterday. Or perhaps a large number of French sympathise with RN’s basic direction & arguments but can’t quite stomach the idea of Le Pen being the visible figurehead of the country – they have certain ideas about the division of labour, so to speak.
It is hard to say, because the voter turnout was so low at the legislative election. Le Pen’s Rassemblement National got around 4 million votes yesterday, compared to Marine Le Pen’s 8 million votes in the first round of the presidential election two months ago.
but surely LBGT, racism and global warming are the only issues anyone cares about, if the meeja are to believed?… Clearly not in France?!… If only our politicians would realise too that no- one actually cares a jot, but they do about economics and freedoms..
I think the simplest explanation is COVID. As we get further away from the pandemic (which everyone, bar a few diehards, if you’ll pardon the unintentional pun) thinks is over, the actions of most Western governments look increasingly absurd. I think very few leaders in power in 2020
Sorry, posted by mistake, and my phone won’t let me edit. Continued … very few leaders in power in 2020 will survive a general election. Macron did, because he was fortunate in his opponent, and this is what he gets.
There has been much talk of the capture of mainstream political parties by their extremist ends. I am not sure that this is a problem in France, but if it is perceived to be then a policy of electing people in such a way to hamstring the political leadership so that they cannot accomplish much is a very fine idea, and indeed the whole point.
His repellent arrogance played a big role. You would think the hunky Morrocan bodyguard would have said something, or his pedophile wife.
As we unravel what has happened in France over the past two months, maybe it can be summed up as John regarding something as “Consensual Centre”, whilst perception of other voters is of a “Global/EU-first and France-second” bloc with disproportionate power?
Millions of voters don’t want to be dismissed as second-class for having that different view, rather they just want the democratic process to be used to push back on some of the failures and excesses of issues, that are clearly beyond the control of their own country’s legislature.
That same process has pushed the UK to a more ‘consensual’ view on contentious issues in the past but seems to have been lacking since around 1997. So France interests me because I feel the same strains will become visible in the UK over time.
I can see that this could produce an unsatisfactory situation for France, which is not good for any of us. But we have to find a safety valve of restoring checks and balances or you’ll get explosions of discontent which will create gridlock at a national decision making level.
Even Andrew Neil was at a loss to explain Le Pen’s vote. My only suggestion here is that a rapid change in demographics is driving voters to go for the previously “unvoteable” because, rightly or wrongly, they ‘perceive’ time is running out for their children and grand-children.
Not anti-EM at all by the way, as his thoughts and views on the future of the EU are consistently more interesting and joined up than the average 2 line tweet of a UK FBPE Twitter account, still fighting last decade’s war.
I’m no France expert, and look forward to comments of people with more scholarly and/or knowledge of France, as sober analysis seems hard to find in UK media this morning. I did try something called the New European but, curiously, it’s sole focus seems to be about a tiny number of politicians on a small island that voted to leave the European Union…
The Vichy regime was a dictatorship without parliamentary elections, which makes the comparison difficult.
John Lichfield wrote, “Two months ago they voted to make Emmanuel Macron the first president in 20 years to win a second term. Yesterday they voted to humiliate Macron by denying him a clear, or even a near, majority in the National Assembly.”
Emmanuel Macron should work with Marine Le Pen to establish an alliance between Ensemble and National Rally. This alliance would have a solid majority in the National Assembly.
He should appoint her as Minister of the Interior and give her free reign on matters of immigration. She will improve the quality of life in France by deporting illegal aliens and halting further immigration from the Middle East and Africa.
Supported by MPs from Natonal Rally, Macron can continue his economic reforms and military reforms. The latter is an ongoing project to establish a European military structure that is independent of NATO. Such independence will be vital for the security of the European Union after the United States, due to its open borders, ceases to be a Western nation by 2040. It will be a Hispanic nation (i.e., a nation in which Hispanic culture is dominant).
Get more info about the immigrant problem in France.
Do you just copy and paste that nonsense into every story? Nobody cares about the supposed demographic changes to America when discussing an article about the French elections