August 11, 2022

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Inflation/Oil and Darwinian Musk Drive Prices in the US

For US inflation data to be published today, referring to June 2022, on an annual basis At a rate of 9-9.1% estimated with a minimum of at least 8.7%. On the other hand, the market operator Bloomberg consensus estimates 8.8%, so values ​​are on the rise.

We now come to the quantitative and descriptive analysis that leads to the above conjectures, and therefore we must immediately say that the basic scenario is always the same, that is, in the medium and long term: the end of the globalization of the United States, which began with the dissolution of the Soviet Union, and then reached the conditions The finale of this great event, through the iconic, glamorous and dramatic appearances of first Covid-19 and then the war in Ukraine; As we have already indicated many times in previous analyses, in the past 30 years there has been no shortage of alarm bells, specifically from Islamic terrorism to the Lehman Brothers crisis, to the Eurozone riots in 2014; In fact, they have all been a series of fault lines at the most basic levels of international affairs; More sectoral phenomena are inherent in these scenarios, such as, for example, excessive financing of economic phenomena with the clear picture of bubbles and bubble that is Wall Street today; So, the discussions and the inherent planning must be remembered Climate change Thus all the problems that arise when projects are conceived and operated minimally; The extreme fragility of the production and logistics chains based on globalization should not be forgotten, in essence, scenarios and methods of operation incorrectly built on the belief “the end of history”, which is another way of defining the American empire.

Given the above introductions, we can now analyze some of the data more carefully, it would be better to say some editorials to Fed Chairman Powell that make me think seriously; In essence, with a logical summary, he asserts that the Federal Reserve will do everything effectively to stop inflation, given that growth and the US economy is strong, and therefore the corollary of this statement is that the real problem for the Fed is: inflation and unemployment swaps, which, in other words , can be expressed this way: the amount of growth It must be sacrificed To stop inflation and bring it to an appropriate level?

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These are the official wishes of the Federal Reserve which have also been presented as strong, almost certain even in the smallest of quantitative and qualitative nuances; In essence, a reassuring scenario was presented to the market because, although difficult, it was under the control of the monetary authorities.

It is precisely these final repercussions that find me utterly skeptical and at odds, and beyond the economic analysis which we shall gradually attempt to better explain in this intervention, there is a rhetorical passage from the Federal Reserve Chairman which, in my opinion, unveils the fig-leaf of all Central Banks wishes; This means that when Powell says almost immediately, as if he were completing the speech completely, the Fed could only control inflation attributable to demand; Well, this rhetoric in the above passage hides the serious problem, because if aggregate supply has little to no effect on current inflation dynamics, why is it implying that supply cannot be controlled by Powell? Because this “rhetorical impediment” hides the real problem: the current inflation in the US is 70-80% exogenous to supply factors and dynamics, and in these scenarios only the White House and Congress can intervene.

For a year or more now, I have been arguing that the most important and decisive external factor of the current inflationary phenomenon is oil, due to its preponderant and partially inelastic role for global energy inputs; It is stated for the thousandth time that oil represents about 35% of all global energy sources of all kinds: polluted and green; Among other things, for about 20% of the entire range of global energy sources, the use of oil is inelastic, which means that it cannot be replaced even by coal and gas at least with a horizon of at least 10 years; Just think of a guide to the world park of road transport, air transport, sea transport and military uses.

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From this point of view, a serious and unmanageable weakness with demand policies, nor with supply policies within the United States alone, is the same. They have no energy independence But only energy security, since about 4 million barrels per day of oil – by the way, a WTI barrel of oil equals about 155 liters of capacity – must be obtained from the world on a total demand of 22 billion barrels per day, and with a dimension of the specification that about 5 million barrels per day supplied to the United States by Canada which can be imagined, which changes the reality a little, like a confederation of the United States; It is for this reason that energy security is born, guaranteeing 18 million barrels per day on the total requirements of about 21.5-22 million barrels per day leads to this result, but not to energy independence, which reveals a lack of about 4 million barrels per day of current industrial production can be found and capabilities of the anthropological system outside the country and Canada.

It is for these reasons that the present level of inflation exists in the United States of America, i.e. in relation to how the needs of aggregate demand are regulated, the lack of the desired quantity of oil in its availability leads to an increase in the price of oil. For this path to growth and exacerbation of the entire inflationary phenomenon, which must be remembered, is then fed by other secondary but also important factors: the collapse of global supply chains due to Covid-19, fragmentation and uncertainty in the labor market, especially in the past two years, once Others due to Covid-19, followed by wealth effects from domestic real estate bubbles, turmoil and concerns about green industrial policy implementations, and last but not least one of the problems: ie fair social distribution and effective income of the nation, a problem exacerbated by the massive amount of public debt; For the validity of the data, it must be remembered that it is the largest public debt in human history.

This last aspect turns out to be a harbinger of social and civic problems that can become unmanageable Statement from Elon Musk, a character who gives me no human security or sympathy; Well, the statement in question focuses on the fact that in moments of inflationary and industrial crisis the path to follow is competitive stagnation of the Darwinian type: the weaker and more effective subjugation, giving way to stronger social groups and projects.

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A deep analysis of the human social seriousness of such a rant is made by an undoubtedly brilliant man but with strong aspects of recklessness and contempt towards the ‘normal person in the street’; That in terms of the economic and financial debate more explicitly, our debate is on a collision course with US President Biden, who – in my opinion rightly in such situations – would like to tax and contribute to the enormous wealth of American billionaires, with unchanging spending balances if It was not regressive to the public budget, to relieve the inflationary burden above all of the consumption of the weaker social groups and the consequential and primary mass consumption. Musk’s idea and thus the most reckless and powerful of Wall Street are diametrically opposed to the whole line of endless indignation of the American Dream: the only materialistic person who is the undisputed architect of his destiny.

In my opinion, this is the root of the problems we observe today in the world: globalization is failing and, in part, already downsized because the deep, vast and millennial anthropological fabrics in other parts of the world do not want to lose the fabric of their identity in favor of a new American one.

The result: more uncertainty, more distances, and thus projects and economic resources that are longer and more difficult to manage, which means nothing more than facing higher costs, and therefore greater inflation until a giant picture is recreated. On the basis of the newly concluded strategic agreement between the United States and Russia.

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