Precarious and Interesting Times

Some days the torrent of information runs so fast that catching up with it all can be almost impossible.

There is now so much going on around the world that is truly significant, any one of them could result in monumental changes.

The Australian election result will certainly change the country. It's unlikely that we'll have a majority government which will likely result in more irresponsible policies and reckless spending.

Interest rates are rising around the world leading to higher debt servicing costs.

This is on top of higher inflation and slower economic growth. The United States has already had a negative quarter of growth which suggests a recession is looming over there.

If that happens, I predict trillions in new government spending and even a possible reduction in rates. The government would choose to keep the economy alive over slaying the inflation dragon.

This would confirm the stagflation prognosis we have discussed for the last couple of years.

Also in the USA, a leaked Supreme Court ruling suggests a majority decision to overturn abortion rights. This has caused the pro-abortion crowd into a frenzy of protest and will deepen the divide across the country.

Expect more political turmoil as every legislative and coercive public measure will be used to reverse this decision.

Then there is the Russia Ukraine conflict which continues to be a barely concealed proxy war with a high likelihood of escalation.

The European Union is going full authoritarian mode with a proposal to entrench privacy invading tracking technology across the supra-state.

At least some EU MPs are now actively fighting back.

Australia experienced our first interest rate rise in 12 years and more are on the way.

This will prove very difficult for heavily indebted families and given how highly leveraged our economy is, growth could slow markedly. With one economist predicting inflation staying stubbornly around 6%, it means home loan rates might be higher than that (think 8-10%).

I am not sure how many people could cope with an effective doubling of their debt servicing obligations.

The increased finance costs for business will also filter through to higher consumer prices. This will result in increased wage demands, leading to higher costs and higher prices. An economic catch 22

That's why nipping inflation in the bud after it is identified is often a very, very difficult proposition.

It all adds up to a pretty miserable picture where any piece in the jigsaw could potentially lead to an economic crisis most have never experienced before.

We certainly live in interesting and rather precarious times.

That looks set to continue for a while yet.