As noted the last time we visited Mr. White:
REPOST—Futureflation: Transitioning from an "Era of Plenty" to an "Era of Shortages"
A very insightful article that deserves a wider audience. Originally posted Thursday January 5.The writer, William R. White, was chief economist at the Bank for International Settlements for 13 years.He and his team at the BIS made a couple remarkable forecasts that we happened to catch. If interested see after the jump....
And from Neue Zürcher Zeitung's TheMarket.ch, February 23:
William White, former chief economist of the Bank for International Settlements, sees several reasons why structural inflationary pressures remain high – and why central banks face an almost insurmountable task.
William White is used to warning the powerful in the financial world - and being ignored by them. The Canadian has worked for central banks for almost fifty years, most recently for the Bank for International Settlements (BIS) in Basel, where he was chief economist until 2008. He was among the few voices warning of the financial crisis at the time.
White does not think much of the hope currently prevailing in the markets that inflation will quickly evaporate. A series of supply and demand shocks suggest that structural inflationary pressures remain high. «Interest rates would have to rise», White says in an in-depth interview with The Market NZZ, but the big question is whether central banks could allow that to happen at all.
The stakes are high, he warns. «What if all of a sudden citizens become convinced that the government is not delivering on its promises? Where does that lead in terms of democracy and faith in the system? These are dangerous things. We have to get this right.»
«Not only are we going to see negative supply shocks, but at the same time we’ll have
positive demand shocks. That's a recipe for higher inflation and higher real interest rates»:
William White.
There seems to be an optimistic feeling currently that inflation is coming down rapidly while the major economies will avoid a recession. What’s your take?
You know me, I’m always looking at the dark side. Sadly, most of what I have been worried about has come to pass. Today, I think that markets are far too optimistic about disinflation: Certainly what we are seeing is that the worst aspects of the supply constraints seen during the pandemic are winding off. Goods and transportation prices have come down a lot. But when you look through that, it’s hard to see how you can get further disinflation everywhere without some kind of a real demand side impetus.
You mean a recession?
You need something like a recession or a sharp slowdown in profitability, one or the other, to get further disinflation. I just don’t see how to get back to 2% without any kind of real demand side destruction to force it to happen. There is a presumption for an immaculate disinflation, without messy side effects. I can understand the hope for this, people want to have a nice, soft landing, with no price to pay. After so many years of low inflation rates, people may think that this is the normal state of things. But hope doesn’t mean it’s going to happen. I worry that a number of inflationary forces will remain in place for a long time.
Which forces are these?
We can distinguish between supply shocks from past policy and future supply shocks. First, we can establish that there was an excess stimulus of demand during the pandemic, and the system is still working through that. Plus, all downturns have hysteretic effects on supply, you never totally recover. And I think the Covid pandemic has the potential to leave even more scarring, especially in the workforce. In the short term, we have the issue of the reopening of China, and we can’t say yet what the implications of that will be. On the one hand, you can say China is back in terms of production, but I think what’s more likely is that China is back in terms of more consumption, particularly for commodities. The other thing that worries me about supply side problems from the past is the gigantic resource misallocation that was associated with easy money over such a long time period: There are oodles of unprofitable companies, zombies, kept alive by easy money. These zombies tended to keep prices down because of extra production capacity, but now with tightening monetary policy, many zombies will get wrung out of the system. Those are the supply shocks from the past. More important are the ones that lie ahead, though.
Walk us through them....
....MUCH MORE
Also at NZZ's TheMarket.ch, February 17:
Jim Chanos: "I’m not Sure Speculation Is Gone"
Jim Chanos, president and founder of Chanos & Company, believes the level of silliness and speculation seen in 2020 and 2021 marked an important moment for valuations. He talks about the biggest fraud which is hiding in plain sight and why he believes Tesla has a long way to go down....
For what it is worth Mr. Chanos has been short Tesla for a very long time.
Here is a post from Monday, December 4, 2017
The Short Argument Against Tesla
Mr. Chanos was taken to the cleaners by Mr. Musk on SolarCity, had Tesla not bought it, SCTY was on its way to bankruptcy court. We have quite a few posts on the bad blood between the two, use the 'Search Blog' box search term SCTY if interested.
And before that, May 31, 2017's "Hedge Funds: SALT Conference Losing Luster":
I don't think we even covered it this year although I did look at Chanos on Tesla.
He was early....
We have dozens more posts om Mr. Chanos and Mr. Musk, use the 'search blog' box upper left, if interested. Here's the last decade of the stock's action via BigCharts: