Tag Archives: trade

2017 means reflation – but what about the Trump Matrix.

Below is a useful graph from the National Australia Bank’s 2017 Outlook. It shows the inflation relative to the central target rate – so for New Zealand the current inflation rate is 0.4% but the policy target agreement is 1 – 3% with a target of 2%. Therefore NZ is 1.6% short of their inflation target.

Inflation globally has been a record lows and according to the IMF “cyclical unemployment and weaker import (commodity) prices can account for the bulk of the deviation of inflation from (central bank) targets …..but other unexplained factors have been playing an increasingly larger role”

Inflation relative to CB target.png

In 2017 it is predicted that higher commodity prices and wages will lift global inflation. With the US Fed raising interest rates there is the sense that inflation could be on its way up.  Also spare capacity is forecast to reduce in most advantage countries with the US already at full employment.

A Trump policy of protectionism and expansionary fiscal policy would definitely mean a more hawkish US Fed. If he does follow this agenda the US will initially experience some kind of stagnation environment, but given the chance for trade retaliation this could quickly lead to a global recession which could eventually push the world close to a secular stagnation scenario of low growth, low inflation, and low productivity. Below is a very informative matrix from NN Investment Partners.

Trump Matrix

Trump Matrix.png

Historical trading between the pacific islands (Pre-Columbus)

Many thanks to Kanchan Bandyopadhyay for this graphic showing transoceanic commerce between Pacific Islands before Columbus was even born.

Blue lines show where Samoan-manufactured lithics were EXPORTED to and red shows where Tongans IMPORTED their stone goods from. Pohnpei is 2,500 miles (4,000 km) from Samoa, and Tahiti is 1,700 miles (2,700 km) from Tonga – and the ancestors were sailing these routes intentionally for commerce, conflict, marriage and vacation.

pre-Columbus trading in the Pacific Islands