Common misconception.
Prostitute logic works like this:
i) some people can afford to pay.
ii) if others can’t, there’s always some that can.
iii) therefore, to maintain the same income, I have to charge the ones that can afford it, more.
We've chatted about this previously, this logic does work in a scenario of marginally lower demand, such as a reduction in 10% in demand.
However, this logic doesn't work if, say, demand drops 50% +.
Many valid points, but the one I state again is much of this price stability argument and it will be "business as usual" people are basing on the very benign economy we've had for probably 40 years now and most can only remember. Even through the financial crisis most people were protected through it.
I think things get so bad in the next 18 months, it isn't business as usual.
I've always caveated this with the central banks pivoting and dreaming up another financial stability tool that kicks economic problems down the road, in fact I'd say this most likely. However, most major economies on the current path are heading for, or already in recession and most economic indicators are flashing big danger signals.
Just think about America for example, they are already in a technical recession. But the scary fact is they were in this recession with interest rate at 0.25%. Where does the USA economy end up with interest rates closer to 4% and further QT? The federal reserve, and most western central banks now have a very clear choice, continue to fight inflation with 4-5-6% interest rates and see massive recessions and asset bubbles burst, or lose the battle with inflation and focus on fighting economic recession. Either way, they lose and economic demand, especially in discretionary spend is decimated, for a period.
The fairy tale that central banks told us about the fact they could raise interest rates to fight inflation and they could win this battle quickly without triggering a recession is about to be exposed. As always, most people don't see it coming and are ill prepared for it.
We knew a pandemic would come again, we were not prepared. We knew inflation would come again, we were not prepared. We knew a war would come again, but were not prepared. We know fossil fuels and our dependency on them is a problem, but are not prepared. And we know economic recessions and depressions will come again, but once again we won't be prepared!