In July 2022 New Zealand inflation hit 7.3%. It was worse in some other countries. Both US and UK were at 9.1%. In US 85% thought the economy is getting worse, a figure that should make us all think hard.
The usual solution to inflation is for the Reserve Bank to raise interest rates, but we will never win this way. Inflation is here to stay until we see the light regarding currencies. This at least will resolve food price inflation to some extent.
Today I read a scary article called Heatflation. Unseasonably hot weather is pushing up food prices in the northern hemisphere and locusts are reducing alfaalfa crops in Sardinia.
We could do the same for the Southern Hemisphere, currently experiencing winter floods and storms. This of course has an effect on our food security. The recent NSW floods have affected farmers there. Major exports to New Zealand included wheat, beef, fresh grapes and pork. And Sydney’s food supply has been damaged. The main commodities in the Sydney basin were leafy greens and winter vegetables like cauliflower, cabbage, potatoes, fruit, dairy and poultry.
As we know climate change is bringing worse floods, storms, wildfires, heatwaves and droughts, all affecting the production of food. So these events are not going away, they are going to get worse.
So heatflation will be supplemented by stormflation, always affecting food prices.
Resource depletion inflation
Early in 2008 our then Parliamentary Commissioner for the Environment, Dr Jan Wright, submitted to the Finance and Expenditure Committee on inflation. She called her talk “Impact of natural resource limits on inflation and growth,” and noted there were resource depletion issues, particularly of oil.
With the price of oil having hit over US$120 a barrel this year, and New Zealand petrol prices rising to over $3 a litre, our government saw fit to cut fuel taxes to keep sweet with the public. They have now extended this situation till January.
With us being dependent on diesel trucks to transport our food round the country, this has kept the food prices from rising too far.
Should we leave economics to the economists?
Well, most of us do. The business reports on radio and television are for those who are interested. We listen to bank economists and others and mostly trust them. We prefer to opt out.
An op ed in the Otago Daily Times by Janet Stephenson, a research professor at the Centre for Sustainability, University of Otago, while challenging readers to rethink the necessity for economic growth, avoids the topic of food inflation. Most people leave economic issues to the economists – not a great strategy when you think only five economists worldwide predicted the 2008 economic crisis.
Then there is inflation caused by the pandemic, with supply chain disruptions causing increase in transport costs. Add a war in Ukraine and we have warflation to add to the mix.
So while commentators seem to think inflation will pass, more people are believing that it is here to stay.
So what are the solutions?
Well I have been for twenty years involved with the Living Economies Educational Trust and many years ago wrote a book on complementary currencies round the world and over time. It was called Healthy Money Healthy Planet –Developing Sustainability through New Money Systems.
In the process I made friends with a UK economist Richard Douthwaite, who wrote many books about money, including one called The Ecology of Money