When government tries to frame the central bank

Don’t simply believe that central banks cause or can solve inflation.

The rhetoric, economic policy and legislation of government cause, create and add to rising prices.

Whether they allow energy exploration or development, subsidise housing with taxation free of capital gains, not encouraging longer term residential rental tenancies, not securing internal production supply of key commodities or food stuffs or placing tariffs on imports, government

Don’t be fooled by Joe Biden’s framing of remarks that he ‘respects an independent Fed’ etc etc…..should inflation not decline prior to the November 2022 mid-term elections, he is trying to set them up as the ‘fall guy’, when in turn he could have (as can Australian politicians) changed policies to help abate inflation.

Yet, it’s too late for Biden’s vote prospects to do that, so instead, they’ll work on a plan to blame the central bank for any short-comings.

In Germany, where you can lease a house for longer periods of time and where more than half the population rent, they are not seeing notable inflation in the cost of housing. (see graphic below)

It’s understandable that their price of energy is rising sharply, due to another policy error of relying too heavily on a key supplier.

Australia and the United States have energy resources.

Why are these locally sourced costs rising ?

It’s governmental economic policy to blame, not central bank monetary policy.

Graphic source: https://www.destatis.de/EN/Press/2022/05/PE22_221_611.html#:~:text=WIESBADEN%20%E2%80%93%20The%20inflation%20rate%20in,rate%20had%20been%20%2B7.4%25.

June 3, 2022

by Rob Zdravevski

rob@karriasset.com.au