Porridge Extra – 30th September 2021: The Looming Energy Crisis: People Are Going To Die This Winter For many months…
It’s silly season in the UK as the queues lengthen at petrol stations, raising fascinating questions about how the pandemic has changed behaviours, the pricing of corporate credit and equity fundamentals. In Europe the power vacuum left by the last days of Merkel is set to deepen. China’s property meltdown should be making investors look elsewhere and into new Emerging Markets for future growth.
Who cares who replaces Angela Merkel? But the likely inability of the ECB to address the consequences of monetary experimentation and inflation in coming years could cause Germany’s coming generation of bland political nobodies to be superseded by something more populist and chaotic, creating all kinds of problems for Yoorp.
The ECB has tweaked the words and now has low interest rates forever, and a new mandate to “tolerate” higher inflation. What will it achieve? To answer look at the failed 30 year experiment in Japan and the multiple parallels. The outlook for Europe as a global economic and innovative powerhouse looks shaky.
Global Stock markets seem to be living the dream, but under the surface there are serious concerns. In Yoorp the ECB makes its power play this week to confirm its place within the political trinity of States, EU and ECB by effectively handing itself control of the fiscal and industrial policy levers that could power up Europe. No one tell the Germans…
5 years after Brexit vote and the sun still occasionally shines. For how much longer. Don’t worry… it could be much much worse..
As the UK and Yoorp prepare for a set-to over Sausages, the real issue remains inflation vs deflation. Are rising PPIs in China due to speculation on commodities boosting prices, is inflation due to supply glitches, and are the longer-term threats of Central Bank taper, growing West-East tension, and the reality of pandemic debt likely to tip us back into a deflationary cycle?
Across the Occidental Economy there seems a trend towards political failure as polarization, sleaze and opportunism takes hold, even as electorates suffer from increasing inequality and declining prospects. As the threat of post-pandemic inflation rises, the ingredients are all there for further instability and labour strife. It’s all happening as the geo-political spheres of influence between China and the West are being redrawn.
Europe’s plans for a €1 trillion bond programme will create a single US Treasury scale market, but who agreed it? The big risks are the imperfect non-democracy’s funding programme will magnify political volatility, while empowering bad political deals.
Central Banks are playing the “lower for longer” interest rate card to reassure markets on growth. There are always consequences of such actions – ranging from bubbles, delusion and fraud. Eventually consequences trigger change, and reassessment – which is driving the rotation from Hope as a Strategy Tech into Fundamental stocks – Autos are a good example.