Year of the Long Grind 2

Written By: - Date published: 10:49 am, July 22nd, 2023 - 26 comments
Categories: food, International, labour, national, political parties, Russia, Ukraine - Tags:

There will be no respite for any of us this year and National has no cure for it.

Anyone who thinks a National government will decrease inflation by cutting public spending is fooling themselves. No matter who is in government, the world is going to be unstable and it will continue to destabilise us. Even if United States inflation stabilises, many other factors will continue to hit us.

Some of the scale of public spending here is caused by the multi-billion multi-year post-Gabrielle (etc) flooding recovery. Some of it by higher overall state spending such as health, every year. More of it is pushed by highly demanding public sector union wage demands keeping unemployment very low and wage inflation high.

Nor is there any intervention a National-Act government might entertain that will bring supermarket prices down from their astronomical highs. Because we are a food exporting nation and food supply certainty is low in multiple commodities including grain, prices for foods here as in our exports will drive high.

But most of the uncertainty, as in 2022, is caused by the Russian invasion of Ukraine.

On July 17th the Russian government announced that it was pulling out of a deal to facilitate the export of millions of tons of grain from Ukraine ports. The arrangement had been in place since July 2022 and world prices had stabilised somewhat in that time. The United Nations chief had, back in June, worried that Russia would do this, and they did.

This is going to cause the same chaos as it did previously. The United Nations Secretary-General said: “At a time when the production and availability of food is disrupted by conflict, climate change, energy prices and more, these agreements have helped to reduce food prices by over 23 per cent since March last year.”
He noted that the U.N. World Food Programme shipped 725,000 tonnes to support humanitarian operations in Afghanistan, the Horn of Africa and Yemen, relieving hunger in some of the world’s hardest hit regions.

Russia has also heavily mined some of the richest grain producing areas in the Ukraine. It is using a very high density of mines to defend the territory it still retains because it does not have enough soldiers to otherwise defend the land it has taken.

Russia is also actively destabilising the largest nuclear powered electricity generator in Europe in Zaphhorizia. This will continue to destabilise energy supplies and energy markets across Europe for as long as this plant is under threat. This is deeply energy-price inflationary.

Russia has also actively destabilised European society with millions of Ukrainians, Belorussians and Russians leaving those countries for Germany and Poland.

Whether it is inflationary or not, Russia has also caused one of the largest environmental disasters Ukraine has faced by sabotaging the Kakhova dam, destroying many towns, and cutting most of the water to Crimea and much of the irrigated farmland that depended on that water.

Russia’s sustained invasion and effective stalemate with Ukraine is also viewed as a massive defence threat to Europe, with Finland and shortly Sweden about to join the NATO alliance. This will ultimately redirect higher spending to defence across both NATO members and others such as Japan and Australia, as much of this aligned world prepares for a wider war, a highly protracted one.

There is no sign that either Russia or Ukraine have the capacity to conclude this war inside 2024 nor any political will to even generate an armistice that might freeze actual armed conflict.

With or without the war, energy prices across the United States and Europe are going through the roof this northern hemisphere summer due in part to heat waves.

None of this is the fault of any New Zealand government be they Labour or National.

Global inflation will likely be led downwards by the aggressive rate rise interventions of the United States Reserve Bank, and it appears to be working.

Here, there is no no sign that interest rates are coming down soon, and there ain’t too many developers left who will build something for sale when prices according to Treasury at Budget 2023 will ultimately drop 21% below peak prices hit in November 2021. No one is going to make money because no one will be selling.

Our core protection from the instability of the world is to the 1.4 million New Zealanders who are heavily subsidised through different forms of welfare including NZSuper.

For the rest of us, we do not have the functioning life we used to and there is no going back to it.

So do not alter your vote on the basis that National will make life cheerier. It won’t.

I’d suggest voting for the party that has the record of keeping people and business highly subsidised by the state against the cruelty the world has for us all.

There will be no respite for any of us this year, except maybe the Barbie movie.

This continues to be Year of the Long Grind. The next Parliamentary term is more of the same.

26 comments on “Year of the Long Grind 2 ”

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  1. adam 1
    22 July 2023 at 12:12 pm

    Why did you not mention the greed of the corporate class as a major drive of inflation? Because you blamed workers with the whole wage inflation thing. Then it was the Russians fault. But not the class who are driving the bulk of it.

    Come on dude, people here are well read, and most know at least a bit of Marx. I agree national/act have no answer to the mess. If left to run with their far right economic solutions, they will do nothing but empower the corporate class to keep inflation high to maximise profits.

    • SPC 1.1
      22 July 2023 at 7:12 pm

      The best way to manage corporate greed (no second GIB board factory until there was a shortage) … is to reduce cartel power (and or regulate), and to tax windfall profits.

      The second could be effected via a change to corporate tax to a progressive tax system – thus apply a top rate on banks and supermarkets (30-39%) and a lower rate on developing local businesses (20-30%).

      • SPC 1.1.1
        22 July 2023 at 7:50 pm

        Of course the most egregious case of privilege is the class system established via no CGT nor gift duty and restate tax or wealth tax and allowing the leveraging of property ownership to acquire more and more wealth.

        Now our home ownership levels are lower than the UK and falling – and they have CGT and estate tax to disperse some of the property wealth, whereas we do not.

        We may soon be the worst of all OECD nations in terms of equity.

      • adam 1.1.2
        22 July 2023 at 11:01 pm

        See no political will to tax the corporate class.

        AS for equity, to many pull the ladder up's. Just look at those who see act as salvation, they want to burn everyone who did not make it up the ladder.

        • georgecom 1.1.2.1
          23 July 2023 at 1:08 pm

          the economic conditions at present makes a CGT common sense. The right wing has few answers to the present economic or environmental issues facing the nation

  2. Blazer 2
    22 July 2023 at 12:33 pm

    So it's all Russias fault!

    Apart from the blowing up of Nordstream,sanctions and the freezing funds debacle the West effectively torpedoed a negotiated peace settlement to end the conflict.

    Ukraine and Russia explore neutrality plan in peace talks | Financial Times (ft.com)

    Did Boris Johnson scuttle a Russia-Ukraine peace deal – back in APRIL? | Vox Political (voxpoliticalonline.com)

    • SPC 2.1
      22 July 2023 at 7:15 pm

      The conflict between NATO and Russia over Ukraine has an impact on European inflation (energy costs) rather than here anyhow. And otherwise on those dependent on food exports from Ukraine and Russia.

      We are more impacted by the stand-off between the Western economic order and the One belt and road alternative – where they no longer operate as partners in a global supply chain system.

  3. Jono letts 3
    22 July 2023 at 6:51 pm

    The article makes some interesting points about inflation..just the blatant russiaphobia displayed is highly disturbing.

    Many "claims" are just speculation.

    a ) I don't remember usa doing a deal with iraq govt owned oil companies to "keep supplying" customers..they were blatantly Taken over by the invaders.

    B) it is actually bj and the USA who are just as responsible for torpedoing peace talks. See April 2022 for more info.

    C) BIDEN actually actively got involved. He had the choice to Not Intervene. The United Nations was Actually Created (see ww1 and the lead up to it) to diplomatically solve precisely this situation. BIDEN actively undermined the UN.

    D) claims that dams and nuclear power stations are put at risk ….no proof it was Russia.

    E) The Alternate Reality of the West not intervening eg nato..hasn't happened..so blaming everything on Russia is simplistic

    Example: I don't remember putin sending weapons to saddam march20 2003+

    F) I don't remember the u.s invasion of iraq as a massive threat to S.A Egypt or Iran. More attempted mind reading of Putin claimed as an eternal truth.

    G) I don't remember massively long articles on the standard prior to February22 condemning Ukraines bombing of russians.

    H) George w bush destroyed the "rules based order" and "STARTED IT" on Oct 7th 2001?

    You really need to pump your American apologist logic harder on here to get someone like me to change my Neutral position on this conflict..and weapons to zelensky…which most disturbingly..my govt supports.

    • SPC 3.1
      22 July 2023 at 7:42 pm

      FACT CHECK

      a There were no customers of Iraqi oil in 2003, there had been sanctions for over 10 years. And not one of the oil contracts awarded by the elected Iraqi government was given to any USA or USA corporation.

      e Putin provided aid to Syria (NATO was not directly involved in Syria) because nations are allowed to respond to request for aid from nation state governments, as many did when Ukraine was attacked by Russian forces. In the case of Iraq, it was a nation under UN sanctions and inspections for WMD, after being subject to UN action over its invasion of Kuwait.

      g Ukraine did not bomb Russian territories, but areas within Ukraine.

      h No, collective security is part of the rules based order – and has been since the UN was formed. The extension to nations hosting terrorist organisations being culpable if they continue to host them after attacks was not unreasonable. After all, the goal of al Qaeda was to destabilse all governments of Moslem population nations via the claim they were western puppets under the protection of the US security regime.

      It could be better argued that the rules based order ended with the false claim of WMD in Iraq. Though those arguing for the west to be blamed for Russia's decision to war on another nation state have no leg to stand on in that matter.

  4. SPC 4
    22 July 2023 at 7:00 pm

    The good news is that inflation will be down to 4% by the end of this year (already 1.% per quarter) but its further decline into the 1-3% band by the end of 2024 might not be so straight forward.

    The bad news is that the El Nino cycle will mean more rain in the north and east coast next year as well (with impact on some of the recovery of those growing zones from this years floods). This and the National Party policy on housing (increasing rents because National will not constrain migration despite rising unemployment) might leave inflation in the 3-4% zone.

    Thus the OCR might also be sticky (because of continuing migration driven demand despite rising unemployment), so most expect it to remain no lower than 5% in 2024, with no fall to 4% till 2025.

    This is largely because of the end to the era of the global distribution efficiencies placing downward pressure on national inflation rates – partly the West's standoff with China and its one belt and road alternative centre to the world economy, partly the pandemic and related workforce issues (long COVID) and partly the Ukraine war/sanctions.

    Thus we return to the old issue of economic management, and in whose interest.

    National want wages held down and accept higher levels of unemployment as the way to keep the inflation rate lower. Inflation (unless it is in asset values) is something they are against. For them the worst of times is when there is inflation and wages increase to compensate and this lowers the real value of their asset wealth. The working class would find the next three years difficult if they were elected. Those paying mortgages on one home would not notice much if any improvement either. The real gains would be made by those with multiple properties and on higher income tax brackets.

    The major advantage of a Labour government re-election is the full impact of their end of mortgage payment deduction against rent income on existing property – this was of a design to encourage home sales to first home buyers and re-investment in new builds. The policy would eventually lead to a lower value to homes for first home buyers and a reduction in rents. Their major mistake was not applying a two year rent freeze 2022-2024 (this would have been a good complementary policy to the petrol price cut) to increase pressure on these landlords and help tenants with rising costs.

  5. Jono letts 5
    22 July 2023 at 8:22 pm

    Some good responses SPC.

    But the overall points I made are not addressed.

    A) I just used oil as a substitute for grain in

    The article…the point being that the invaders (u.s.a) weren't put in that position because precisely and ironically the war was shorter. Fact check..putin or china for that matter..did not send 100b plus in weapons to that conflict. Overall…you seem to excuse the iraq invasion because they didn't blatantly steal oil..how KIND!

    E) you bring up Syria but that is irrelevant..

    We are talking invasions..did turkey invade Syria?

    G) the point here is the lack of attention given to the conflict prior to feb22..your point is noted..it wasn't Russian soil.

    H( neutrals…like myself…would point more to nato expansion to explain putins invasion…….the Reason Iraq and Afg is brought up is to contrast Weapons to zelensky…..vs ….weapons to taliban or saddam….eg the different response.

    Overall…the entire west's narrative on this

    Conflict is that Neutrality is flawed…when in fact That claim Itself is flawed. 204 countries were Neutral when u.s.a invaded iraq.

    • SPC 5.1
      22 July 2023 at 11:18 pm

      Overall…you seem to excuse the iraq invasion because they didn't blatantly steal oil..how KIND!

      Really, … It could be better argued that the rules based order ended with the false claim of WMD in Iraq.

      E) you bring up Syria but that is irrelevant..

      Not really, Islamists tried to take over the government (aided by foreign fighters – a bit like the Donbass in 2014), and Russia stopped this – at the request of the Syrian government. The question could be raised why there was not more help to Ukraine in 2014.

      H The Taleban ruled without elections and hosted terrorist groups with aims to depose governments, Iraqs one party state regime had invaded Kuwait (and used chemical weapons on their own civilians). Who was on their side?

      As for NATO expansion, does Russian action call into question or validate it? Germany had a policy of Nordstrom *2 and retained 1% of GDP on defence spending in 2021 (when they were required to go to 2% by 2024). If Putin had not attacked Germany and NATO were set on a conflict, it will go down as the most self-destructive move in Russian history. From chess grandmaster to chump.

  6. Jono letts 6
    22 July 2023 at 11:57 pm

    Spc..

    Your responses appreciated.

    But the real question is how do 3rd parties

    React to invasions not involving them.

    The un was set up to solve diplomatically

    Nato…

    https://www.nytimes.com/1997/02/05/opinion/a-fateful-error.html

    https://en.m.wikipedia.org/wiki/United_States_invasion_of_Grenada

    https://en.m.wikipedia.org/wiki/Bay_of_Pigs_Invasion

  7. Jono letts 7
    23 July 2023 at 12:04 am

    The Cuban missile crisis revealed in full view to the world how ridiculous u.s.a stance is on international affairs.

    By u.s logic …Kennedys blockade was totally illegal and should have been rammed.

    By u.s logic…mercenaries can travel to Iraq March 03 and kill Americans.

    By u.s logic ..putin should have shoveled weapons in from jan03 and saddam does zoom meetings from his bunker.

    • SPC 7.1
      23 July 2023 at 12:25 am

      Sure. the USA has opposed every left wing government, exceptions only for military allies, regardless of international norm. It is team global American dollar (capitalism rules OK) empire.

      • Patricia Bremner 7.1.1
        23 July 2023 at 6:37 am

        We have to walk the fine line of diplomacy. A small left of centre (US view) country which "could be useful" as a staging post at some point.

        Nanaia Mahuta's skill in dealing with truculent Tainui men is very useful, she is a calm considered presence.

        The leaders of USA China and Russia currently all seem keen on conflict rather than conflict resolution. Dangerous for all.

        Supply lines could again become an issue for us keeping costs and inflation beyond the 1 to 3% target for some time.

        • Sanctuary 7.1.1.1
          23 July 2023 at 10:46 am

          I would have thought the biggest takeout from the Ukraine war is the centrality of collective security buttressed by military alliances to New Zealand's security.

          Why did Putin attack the Ukraine? A big part was because he could. Finland? Once bitten twice shy for Russia with those combative Finns backed up by Sweden. Latvia, Estonia and Lithuania are tiny countries, utterly small fry. But they are in NATO, so they've got a backer with an enormous stick. So dare not attack them. The Ukraine, however, was unallied and alone and, to Putin's way of thinking, easy pickings.

          What that tells me is that in an increasingly dangerous world, the ultimate guarantee of our secuirty is in our alliances with our Five Eyes partners.

          • SPC 7.1.1.1.1
            23 July 2023 at 11:09 am

            Security from our major trading partner?

            If we do not have the option of neutrality (not participating in a warhawk operation as per Iraq, or organised confrontation over Taiwan), is it that useful to us?

            We do not benefit from an arms build up. Nor does anyone from war.

            And we already know the consequence of the western economic order and the one belt and road alternative separating, the dislocation of the global supply chain (increased cost).

            For us and Oz (suppliers) and the USA companies that manufacture there the impasse with China over the two disparate economic spheres developing (the US dollar and SWIFT system global hegemony may soon be ending) has consequences.

            • Sanctuary 7.1.1.1.1.1
              23 July 2023 at 12:03 pm

              I don't think NZer's have any idea how expensive "neutrality" would be. Within an alliance you get to contribute a component of the whole – thus, we don't need a force of expensive fast jets because the Americans and Australians have better and more modern jets that can everything we would need them to do in coalition warfare. Neutral? Bring back jet fighters. But what we do have is four P-8 patrol aircraft which is fully 25% of the combined ANZAC strength in these aircraft. Why? Because it where we choose to contribute to the alliance. In fact, along with the Five Eyes intelligence gathering & our elite special forces, the P-8 is our main cost and contribution to our alliance with some very powerful allies. Expect us to buy at least one more of these aircraft and invest in the long range drones that they are designed to control (the P-8 is capable of being the "mothership" to several large, long range drones like the MQ-4C).

              Ditto with the Navy. we get away with a pair of aging frigates because we are only expected to contribute to second line operations within an alliance. Beecome neutral? We would need five or six major surface warships plus all sorts of other vessels.

              Being part of an alliance saves us a lot of money that we'd otherwise have to waste on defence.

              • SPC …
                23 July 2023 at 12:48 pm

                We are not a member of any alliance now, apart from our security relationship with Oz. That commits them, and via them others, to defend us. It's the only thing they do for us, and in return they steal our workers by offering them more money. This advantages them and thus they have the capacity to defend 7 states, rather than 6.

                We have intell association within Five Eyes. And will probably join AUKUS 2 for the tech development co-op advantages.

                Who says neutrality means being able to defend against others alone? How much money does Costa Rica spend on defence?

                Our security is based on our location, any capacity to arrive here in force would have been confronted long before that stage was reached. It’s therefore somewhat logical our defence forces are developed mindful of that, but that does not necessitate an alliance just the occasional exercise with others.

          • Blazer 7.1.1.1.2
            23 July 2023 at 1:04 pm

            As you think you can read Putin's mind,please enlighten as to who is potentially interested in invading NZ and why?

      • Jono letts 7.1.2
        23 July 2023 at 10:36 am

        When soviet union retracted to Russia in 91..a set of buffer states were created..roughly a distance between Berlin and minsk. As these buffer states defaulted to neutral the demilitarization produced new hope. Russia itself still existed with 17 odd Sq km of resources,nukes for Africa and good relations with many countries on its southern flank such as kazak.uzbek etc. Not to mention neutrals like ind. Mongo.china etc. Yes the balance of power became an imbalance of power…but still a very multipower world. Since putin came in.in99..

        Georgian intven.2008 preceded by Serbia intven 1999.

        Crimea annex 2014 preceded by kosovo 2005.

        The point is…the REACTION..acknowledged and proved the above blurb.

        On February 2022 putin escalates(guilty) but Biden actively intervenes too.. SPREADING a conflict.

        The post above mine talks about diplomacy. Guarantee at no point in blinkens visit to this country this weekend does he say:

        The destiny of Taiwanese people should be decided by the Taiwanese people themselves in a democratic referendum.

        • SPC 7.1.2.1
          23 July 2023 at 10:58 am

          Guarantee at no point in blinkens visit to this country this weekend does he say:

          The destiny of Taiwanese people should be decided by the Taiwanese people themselves in a democratic referendum.

          Are you sure? That is exactly the American position – that they will defend Taiwan from China (despite acknowledging Taiwan is part of China), to ensure Taiwan gives consent to (has veto over) any change in their governing arrangements.

          The diplomatic position would be to facilitate talks over a future autonomy for Taiwan within China, to de-escalate confrontation. The American position encourages a continuance of the status quo (which now includes increases in defence spending in the region).

          This follows American promotion of democracy in Hong Kong – in breach of the 1997 agreement (involved just autonomy till 2047), that led to a crackdown on public protests. And thus renewed focus on the future of Taiwan (with American politicians going there to grandstand for domestic advantage).

          • Jono letts 7.1.2.1.1
            23 July 2023 at 12:02 pm

            You make an excellent point about blinken and Taiwan spc.

            I am looking at it from a military standpoint.

            Your right ..it seems china is just as guilty as the u.s in this regard.

            My question would be better phrased…if Taiwan chose neutrality with no military hardware from either country on its soil…what do Taiwanese choose?

            For example..u.s military on Philippines.okinawa and lower jap islands…who is cornering who?

  8. Bruce 8
    24 July 2023 at 3:34 pm

    Its you tube and not NZ but if this is the situation in the US and we follow. we are in for a rough ride. Perhaps as the interest rate hikes have finished. interest rates have peaked and employment remains full we may avoid the worst of it.

    '15 big box retailers collapsing before our eyes'

    https://youtu.be/MeoiVIBaHYg

  9. Thinker 9
    25 July 2023 at 7:24 am

    "None of this is the fault of any New Zealand government be they Labour or National."

    Except that National is blaming Labour for it and that IS their fault…