This week three things that I read and heard have been coalescing in my brain:

Many building materials are in limited supply at present, with gib board being one of the most notable. The shelves normally filled with gib in hardware stores are largely empty, with signs saying NO GIB AVAILABLE. People cannot order gib and are being told that orders can not be made until July. I was told by a hardware supply manager’s partner that the manager is desperately looking for another job, after staff had death threats over lack of gib and builders blocked store entrances, refusing to leave until they were sold gib board they could see in the store that was allocated to another customer.

One interesting effect of the lack of gib has been the massive rise in price of small pieces of gib, which normally form part of the truck loads of waste created in the New Zealand on-site building process. If you want a repair in your wall because someone lost their temper and kicked a hole in it (this was the example recounted by a builder!), your builder can’t buy a sheet of gib until some unspecified number of months from now. However, they can buy offcuts from a building site where a build is largely complete and no more gib is required. Apparently gib stoppers are having a great time at present because builders are using every tiny piece they can, meaning there is lots of plaster required to smooth over the gaps. This builder described his mate making $1500 last month from selling small gib offcuts, where that amount would normally buy 70 full sheets of gib. We joked about getting full sheets (if you could) and cutting them into the minimum desirable size, turning a $20 sheet into, say, $120 of revenue. Someone could have a lot of fun calculating the optimal size based on likely holes in walls and willingness to pay.

Back last July I wrote a blog on causes of inflation and NZ government predictions for inflation, which had been very wrong up to that point. In July, the Reserve Bank predicted it would need to raise the Official Cash Rate (OCR) to 1.25% in the first part of 2022 to curb inflation. However, they said, don’t worry, mortgage rates will be very unlikely to go above 5%. This month, the OCR was raised to 1.5% with another 0.5% rise forecast for June and commentators predicting mortgage rates will hit 6%. Most new short term mortgage rates are already at 5% with many 4 and 5 year fixed terms above 6%. Oops, economists got that one wrong, again.

The OCR was increased to curb inflation, as one of the few tools that the Reserve Bank has to carry out its mission of managing inflation in the 1-3% target range, which we have way overshot. But how will increasing the NZ OCR change the effects of oil price increases, driven by the war in Ukraine? Or future wheat price increases, from the same cause? Supply shortages of computer chips from the world’s biggest provider, Taiwan, are not predicted to ease for some considerable time, exacerbated by the lack of neon (an essential component) given that Ukraine produces about 50% of the global supply. Therefore, anything needing a sophisticated semi-conductor, including computers, phones and cars, will be supply limited for some time and these are supply limits that NZ has zero traction on – cost-push inflation is set to keep on climbing.

Our government is blaming inflation largely on such external (to our economy) factors. However, they should also be strongly implicating themselves. While cost-push is one critical driver of inflation, demand-pull , fuelled by printing money, is another major driver. New Zealand, like many countries, engaged in very large amounts of quantitative easing (QE) aka printing money, to fuel our economy through the COVID-lockdown strife. We were told (globally) that modern monetary theory meant that the link between QE and inflation was broken. So much for modern monetary theory in practice, I guess. The USA started backtracking on its QE from December 2021, buying back government bonds as well as raising interest rates.

Another interesting take on inflation is that economists don’t think inflation is necessarily a bad thing for markets, as opposed to the general view of populations that inflation outside the ‘normal’ realms is a very bad thing. This results from economists looking at a non-sentient ‘market’ and how well it is operating, versus people looking at whether they can pay their bills, buy the things they need to buy, and have certainty about their futures. One could say, so much for economists (wouldn’t be the first time I have said it, sorry Sarah Nelson who we will shortly proudly see receiving her PhD from Cambridge and who is now a professional economist). Theory is nice but life is lived in actuality, not theory.

One of the worst things about inflation, where economists are in concord with the general mass of human beings, is that expectations of inflation drive inflation – known as built-in inflation . Economists (and governments) don’t want people believing in inflation and thus causing it. Does this lead economists (and governments) to deliberately lie in the interests of curbing inflation? What a strange ethical and logical dilemma, if your profession requires you to lie to achieve its greater goals!

Belief in inflation leading to inflation takes me to the last of my interesting articles of the week (in the Guardian) – “ Is manifesting dangerous magical thinking or a formula for success “? I would posit that it is both. ‘Manifesting’, in this terminology, is the practice of thinking aspirational thoughts with the purpose of making them real. Belief in high inflation leads to problematic inflation, and belief in lack of inflation leads to low inflation. I will grant that high inflation is not an aspirational goal for the populace, but low inflation is.

At its far end, manifesting appears loony – believing that you will be very rich isn’t going to make money magically appear in your wallet or bank account. At the other end of the spectrum, if your belief spurs you to action, there might well be a chain of events following your action which result in the desired money eventually transpiring.

I completely agree with manifesting from the point of view that the stories we tell about ourselves shape our presents and futures. If we say we are lucky, we look for instances with which to reinforce that story. If we say we are unlucky, we seek examples with which to justify that other story. We are constantly reinforcing our self-beliefs through stories about ourselves, driving our narratives forward and thus influencing our actions and outcomes from those actions. The related downside of manifesting is that, if one believes one has entire power over one’s future, then lack of success in life is as attributable to one failing to manifest properly as success is attributable to proper manifesting. This reminds me of the right-wing point of view that says the poor are lazy and would have more money if they would only work harder.

What conclusion can I draw from all these three disparate points? That inflation is the fault of the world (cost-push), the New Zealand government (demand-pull) and ourselves (built-in inflation). That we should find better fortune tellers (aka economists) and more stockpiled sheets of gib to sell at massively inflated prices? That our government and Reserve Bank are not sufficiently good at manifesting to control inflation? Or, if you see a flying pig, and what you believe from considerable experience is that pigs don’t fly, you should focus your energy on believing the pig is not airworthy, at which point said pig will believe you, drop to the ground like a stone and demonstrate to the rest of the populace that evolution refuses to produce pigs with wings.