Inflation. It is the right time to concede

Time period. April 16–22, 2022

Top news story.  IMF Managing Director Kristalina Georgieva conceded that “they have not thought about what mass printing of money can lead to, for example, to an unbearable gap between wealth and inflation”. She sums up: “We have printed too much money and not thought of the unintended consequences. We act like eight-year-old kids playing football, chasing a ball”.

For readers of our reviews, all this is not new, we warned of the inevitability of problems caused by rising inflation, long before the leaders of the major institutions of the Bretton Woods system (the US Federal Reserve, the IMF, the World Bank, the WTO) realized it. In addition, we have repeatedly spoken about the imminent troubles associated with the legitimization of property and the disruption of world trade logistics.

All these problems exist today, but K. Georgieva’s interview is remarkable because it is one of the first public concedings of the irreversibility of the situation. The whole specificity of the present moment is not that there are serious difficulties – it is all seen with the naked eye, but that these actions have led to irreversible changes that cannot be played back despite all efforts. Therefore, each entrepreneur or manager needs to determine how the market in which it operates will change, during and after the crisis. Those who do not discuss or even ignore these issues have no future.


Japan’s service industry has been declining for three consecutive months and has already reached a six-month low:

Japan Tertiary Industry Index
Japan Tertiary Industry Index

Business confidence in France is the weakest in a year:

France Business Climate Composite Indicator
France Business Climate Composite Indicator

The Euro Area manufacturing PMI hit its worst in 15 months:

Euro Area Manufacturing PMI
Euro Area Manufacturing PMI

US housing market index is at 7-month trough but still strong:

United States Nahb Housing Market Index
United States Nahb Housing Market Index

US existing home sales -2.7% m/m (2nd consecutive negative) tumbled to a 2-year low on the back of record prices ($375.3k, +15.0% y/y):

United States Existing Home Sales
United States Existing Home Sales

Mortgage applications in the US another -5.0% per week, the 6th consecutive negative:

United States MBA Mortgage Applications
United States MBA Mortgage Applications

To the lowest for more than 3 years:

United States MBA Mortgage Market Index
United States MBA Mortgage Market Index

Refinancing of previously issued loans is particularly weak:

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It’s all because of the highest mortgage rate since 2010:

Inflation continues to rage throughout the world economy.

CPI (Consumer Price Index) of Japan +1.2% per year is at its highest since 2018:

Japan Inflation Rate
Japan Inflation Rate

Mexico’s CPI +7.7% y/y tops 2001:

Mexico Mid-month Inflation Rate YoY
Mexico Mid-month Inflation Rate YoY

Similarly, less food and fuel:

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Canadian CPI +6.7% per year, the highest since 1991:

Excluding food and energy +5.5% per year, which is a record for 38 years of survey:

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The Euro Area CPI +7.4% per year has surpassed the record high for 31 years of statistics:

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There is also a record month-to-month surge in inflation (+2.4%):

And this is the result of the sanctions war — and who is to blame?

Finally, prices without fuel, food, alcohol and tobacco are also record high (+2.9% per year):

New Zealand CPI +6.9% per year is the highest since 1990:

Canada’s PPI (Producer Price Index) +18.5% per year has reached its almost half-century high:

PPI Germany 30.9% per year and is the highest in 72 years:

The prices paid by the Philadelphia Fed have peaked since the late 1970s:

Dutch business confidence is at its lowest in 36 years of observation:

Record bad (but for 18 years of data acceptance) they are also in Turkey:

The confidence of the British settled at the record lows of 2008:

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Retail sales in China -3.5% per year, not counting January-April 2020, this is an anti-record for a 30-year observation period:

The same is true for the unemployment rate, which is 5.8%, except for the beginning of 2020, which is the worst in in the history of data acceptance:

UK retail -1.4% m/m, 2nd consecutive time in the red zone, in total there were only 3 positives in the last year:

United Kingdom Retail Sales MoM
United Kingdom Retail Sales MoM

Excluding fuel, this will be -1.1% per month and already an annual negative (-0.6%):

United Kingdom Retail Sales Ex Fuel MoM
United Kingdom Retail Sales Ex Fuel MoM

The Central Bank of Indonesia left monetary policy unchanged, as did the Central Bank of China. The US Federal Reserve board members have made it clear that they are ready to push the tightening of ploicy, as they were a week ago.

Summary. Last week, we noted that the United States began a full-fledged structural crisis, economically equivalent to the March 1930 – December 1932 crisis. After today’s statistics, it is clear that this crisis has already affected the entire world economy. And not only food, but also, say, transport:

In many other spheres, the situation is similar, here the picture is quite typical. Yes, degradation processes are already beginning in some industries, and demand constraints play a role, but the general, typical picture has already formed, and any exception from it already needs special explanations.
Let’s note that all this things are dependent on one another.
Yes, most likely, the US had an interest in capital outflows from the EU to its territory (we wrote about this a few weeks ago).
But the EU’s inflation cap is significantly reducing household demand, and it is one of the three major territories (together with the US and China) that form the global economy’s aggregate demand. And does anyone think that the United States wins as a result?
Indeed, according to the previous section, the EU’s problems are largely caused by the sanctions war (which was actively provoked by the US and Britain), but it is safe to say that it has sped up the problems, but has not created them. And many political news (which we are not considering here) give reason to believe that sanctions were developed before the start of the military special operation on the territory of Ukraine.
In any case, a full-scale structural crisis (and its magnitude will be about 1.5 times larger than the crisis of the early 1930’s already mentioned) requires business managers to understand its mechanisms and outcomes. In the meantime, no one — except the Mikhail Khazin Foundation for Economic Research, related structures, such as the “Ark” (“Kovcheg”) Strategic Forecasting Agency” — solves this task, it is not even set. This task, of course, is not among the problems that are described in our reviews, but we must warn our readers to look carefully in this direction. And now we wish you a good work next week!


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